GLOBAL MARKETS-Stocks jump; dollar and yields fall after Fed rate-cut signal

* 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 prices jump after Iran shoots down U.S. drone

(New throughout, updates prices, market activity and comments
to afternoon U.S. trading)
By Lewis Krauskopf
NEW YORK, June 20 (Reuters) - World stock markets gained 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 dollar 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 surged, with an extra boost from 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 0.88%. The index hit its highest since May 1.
On Wall Street, the Dow Jones Industrial Average .DJI rose
145.09 points, or 0.55%, to 26,649.09, the S&P 500 .SPX gained
15.94 points, or 0.54%, to 2,942.4 and the Nasdaq Composite
.IXIC added 37.32 points, or 0.47%, to 8,024.65.
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.
Shares of Slack Technologies Inc WORK.N , the fast-growing
workplace messaging and communication platform, surged in their
debut. The pan-European STOXX 600 index .STOXX rose 0.36%,
reaching its highest since early May. Bank of England officials voted unanimously to hold interest
rates despite some recent suggestions from policymakers that
borrowing costs should go up. The BoE cut its economic growth
forecast for Britain to zero in the second quarter. 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 10/32 in
price to yield 1.994%, 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 0.49%, with the euro EUR=
up 0.61% to $1.1293. U.S. crude CLcv1 rose 5.39% to $56.66 per barrel and Brent
LCOcv1 was last at $64.16, up 3.79%.

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