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GLOBAL MARKETS-Wall St halts world rout in choppy trade
August 9, 2011 / 3:55 PM / 6 years ago

GLOBAL MARKETS-Wall St halts world rout in choppy trade

 * World stocks rebound from 10th straight day of losses
 * Wall Street up more than 2 percent at midday
 * Investors look to relief from Fed at 2:15 p.m.
 * Gold posts another record high
 (Recasts, adds details, updates prices)
 By Leah Schnurr
 NEW YORK, Aug 9 (Reuters) - World stocks rebounded from a
10-day rout on Tuesday as investors looked to the U.S. Federal
Reserve to calm markets, though rallies in gold and the Swiss
franc showed some were clinging to safe assets.
 The Federal Reserve has rescued world markets in the past,
which may explain why some investors were pulling back from the
recent gloom. But such expectation also leave markets open to
disappointment should the statement after the Fed's meeting on
Tuesday be deemed inadequate.
 The Fed may have limited options because the current crisis
is not liquidity-driven, as it was in 2008. The meltdown across
assets instead reflects worries about faltering economic growth
and paralysis at the highest levels of government --on both
sides of the Atlantic -- in dealing with economic problems.
 "If there's no indication of help, selling could come
back," said Cort Gwon, chief strategist at HudsonView Capital
Management in New York.
 In a sign of hesitation that the equity-market rebound
could be cut short, safe-haven bets were still favored as gold
hit another record and investors pushed into the Swiss franc.
 Fears of a new global economic downturn, reinforced by a
downgrade of the United States' credit rating last Friday and
the debt crisis in the euro zone, had sent world shares down as
much as 20 percent from May's peak.
 MSCI's all-country world index .MIWD00000PUS recovered
from early losses and was up 1.1 percent. The earlier drop put
it on track for a 10th straight day of declines, which is
extremely rare. The record is 13, back in the 1990s.
 U.S. stocks were up more than 2.0 percent at midday and
European shares .FTEU3 also bounced to provisionally close up
1.3 percent.
 The Dow Jones industrial average .DJI gained 175.59
points, or 1.62 percent, at 10,985.44. The Standard & Poor's
500 Index .SPX was up 25.22 points, or 2.25 percent, at
1,144.68. The Nasdaq Composite Index .IXIC was up 71.99
points, or 3.05 percent, at 2,429.68.
 The Fed statement was due at 2:15 p.m. EDT (1815 GMT). It
is unclear, however, what the Fed's options are, with interest
rates already near zero and the central bank's latest round of
bond purchases having failed to stimulate credit demand.
For details, see [ID:nN1E77724B]
 SAFETY FIRST
 The saving grace for markets now is that the main arteries
of the financial system -- short-term funding markets and
clearing and processing operations -- are not imperiled, as
they were in 2008. Standard & Poor's downgraded major clearing
companies on Monday but it has not affected their operations.
 There were no signs of distress in overnight repurchasing
markets, where institutions borrow money from one another using
U.S. Treasury securities as collateral.
 Treasuries, which soared on Monday, gave back some of those
gains in active trading.
 The 10-year Treasury note US10YT=RR fell 22/32, its yield
rising to 2.39 percent, erasing about 1/3 of the previous day's
gain and a smaller portion of the week's advance.
 The 30-year bond US30YT=RR last traded down 47/32
yielding 3.73. It touched 3.75 percent in overseas trading and
hovered near its lowest levels since Sept. 2010.
 Higher-than-expected inflation data from China added to
concerns about the global economy. The country's industrial
output also grew at a slower pace in July, with the central
bank trying to keep prices in check without dragging down the
economy. [ID:nL3E7J91PZ]
 A Reuters poll found the United States faces one-in-four
odds of slipping back into recession, and a weaker economic
outlook is raising the likelihood the Federal Reserve will soon
do more to boost growth. [ID:nL9E7I401E]
 Gold XAU= hit a record $1,778 an ounce in its biggest
three-day rally since the financial crisis in late 2008. It
gained more than 3 percent on Monday.
 Spot prices retreated from the highs but were still up 1.4
percent.
 The Swiss franc surged to record highs for the third day in
a row against the euro and the U.S. dollar.
 The euro dropped to its lowest on record at 1.0475 Swiss
francs EURCHF=EBS on trading platform EBS. It was last at
1.0528 in volatile trade, down 1.7 percent for the day.
 The franc also rose to an all-time high versus the dollar
CHF=EBS of 0.73592 on EBS before easing to 0.7394, with the
dollar down 2.1 percent.
 The Japanese yen, which also tends to benefit in times of
market stress, breached 77 yen per dollar, above levels that
triggered official intervention from Tokyo last week.
 (Additional reporting by Ryan Vlastelica in New York; Editing
by Dan Grebler)







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