World stocks held steady below this week's three-month peak on Thursday after the Federal Reserve left the door ajar for more interest rate cuts instead of declaring the worst of the credit crisis was over, Reuters reported. The U.S. central bank cut benchmark interest rates on Wednesday to 2 percent, and has now lopped a hefty 3.25 percentage points off rates since September. It dropped a phrase contained in its last announcement that "downside risks to growth remain" and flagged up rising energy and other commodities prices but said it would act as needed to support the economy. "The promise to act as needed to promote sustainable growth and price stability gives the FOMC ample scope to respond to incoming data," said Steven Pearson, chief strategist at Bank of Scotland Treasury. "However, the pro-risk move faded ... as implications of exactly why the Fed did not feel comfortable enough to sound the all clear sunk in." The FTSEurofirst 300 index was nearly unchanged on the day while MSCI main world equity index was also steady. Major continental European stock markets are closed for the Labour Day holiday. April was the best month for world equities since May 2003. The MSCI world index rose 5.31 percent over the month, just above the 5.30 percent gain of Nov. 2004. Growing investor optimism and emerging inflation concerns are weighing on safe-haven government bonds. Citi's world government bond yield rose nearly 32 basis points in April, closing at 3.1718 percent versus 2.8650 percent end-March. The dollar rose 0.4 percent against a basket of major currencies on the day while the euro lost 0.6 percent to $1.5523. Sterling rose 0.2 percent on the trade-weighted index, benefiting from a report by the Bank of England that said the scale of losses and the economic fallout from the credit crunch may not be as bad as feared and subprime write-offs could end up costing less than half market forecasts -- which are around $400 billion. U.S. light crude rose 0.3 percent to $113.80 a barrel while gold jumped almost 2 percent to $881.30 an ounce.
