GLOBAL MARKETS-Fed rate-cut signal sends stocks surging, wounds yields, dollar

* MSCI world index surges, S&P 500 hits record high
* European shares touch six-week highs
* U.S. 10-year Treasury yield falls below 2%, dollar drops
* Oil jumps after Iran shoots down U.S. drone

(Updates with opening of U.S. markets; changes byline,
dateline, previous LONDON)
By Lewis Krauskopf
NEW YORK, June 20 (Reuters) - World stock markets surged on
Thursday, with the U.S. benchmark S&P 500 hitting a record high,
while the 10-year U.S. Treasury yield fell below 2% as investors
digested a signal from the Federal Reserve of potential U.S.
interest rate cuts as soon as its next meeting.
The U.S. dollar also weakened after the Fed - the U.S.
central bank - on Wednesday indicated a marked shift in
sentiment even as it left its benchmark rate unchanged for now.
“We have obviously morphed into the Fed taking the pole
position as far what's driving the market right now, both
domestically and on a global basis as well,” said Mike Mullaney,
director of global markets research at Boston Partners.
"It's risk-on trade again right now for the time being and I
don't see anything on a near-term basis that is going to disrupt
that."
Oil prices also surged, lifted by the Fed as well as by news
that Iran shot down a U.S. military drone, raising fears of a
military confrontation between Tehran and Washington.
MSCI's gauge of stocks across the globe .MIWD00000PUS
gained 1.02%. The index hit its highest since May 1.
On Wall Street, the Dow Jones Industrial Average .DJI rose
203.87 points, or 0.77%, to 26,707.87, the S&P 500 .SPX gained
21.98 points, or 0.75%, to 2,948.44 and the Nasdaq Composite
.IXIC added 65.04 points, or 0.81%, to 8,052.36.
Energy .SPNY , technology .SPLRCT and industrials
.SPLRCI were among the best-performing S&P 500 sectors.
“Cyclicals are definitely getting a big pop today,” Mullaney
said.
The pan-European STOXX 600 index .STOXX rose 0.52%,
reaching its highest since early May.
Benchmark government bond yields in the United States and
Europe tumbled following the Fed's decision, with the U.S.
10-year note yield falling below 2% for the first time in 2-1/2
years. Benchmark 10-year U.S. notes US10YT=RR last rose 12/32 in
price to yield 1.9855%, from 2.027% late on Wednesday.
"The statement indicated the Fed no longer insists on a
pause or patience, providing an open ear to doves at upcoming
meetings. Also critical ... acknowledgment that inflation
pressures are muted," said Jim Vogel, interest rate strategist
at FTN Financial in Memphis, Tennessee.
"As difficult as it might be to imagine, rates are also free
to fall further," he added.
The dollar index .DXY , which measures the greenback
against a basket of currencies, fell 0.46%, with the euro EUR=
up 0.6% to $1.1291. U.S. crude CLcv1 rose 5.73% to $56.84 per barrel and Brent
LCOcv1 was last at $64.51, up 4.35%.

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Graphic: World FX rates in 2019 http://tmsnrt.rs/2egbfVh
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