* Federal Reserve cuts interest rates by 50 basis points
* Gold soars 3% after Fed's rate cut
* Dollar sinks, oil pares initial gains
By Herbert Lash and Matt Scuffham
NEW YORK, March 3 (Reuters) - Global equity markets slid on Tuesday and the yield on 10-year U.S. Treasuries fell below 1% for the first time after the Federal Reserve cut interest rates in an emergency move to shield the U.S. economy from the impact of the fast-spreading coronavirus.
Gold prices surged and the dollar sank as markets reacted to the Fed's surprise cut of the federal funds rate by a half percentage point, to a target range of 1.00% to 1.25%. on U.S. government debt fell across the board as investors grabbed Treasuries and other safe-have assets, such as gold, amid the uncertainty sparked by the rate cut.
Fed Chair Jerome Powell said in a statement that the coronavirus would weigh on the U.S. economy for some time and he believed the central bank's action would provide "a meaningful boost to the economy."
The slide in stocks and rise in safe-havens suggested markets found the Fed's action inadequate to an epidemic that has killed more than 3,000 people worldwide and threatens to significantly slow global growth. Fed's pre-emptive strike against the coronavirus has backfired," said Michael Arone, chief investment strategist at State Street (NYSE:STT) Global Advisors in Boston. "The reaction has signaled to the markets that the coronavirus is on par with things like the Great Depression, the technology-media-telecom bubble bursting or the global financial crisis."
Demand is falling and supply chains have been disrupted, symptoms that lower interest rates do not cure, Arone said.
The unanimous decision by policymakers to cut rates before their next scheduled policy meeting on March 17-18 reflects the urgency with which the Fed felt it needed to act to prevent a potential global recession.
Stocks on Wall Street initially spiked more than 2% on the Fed's surprise statement. But the Dow Jones industrial average .DJI , Nasdaq composite index .IXIC and S&P 500 .SPX fell sharply in afternoon trading.
President Donald Trump said his administration was working with Congress to pass an emergency spending measure to ramp up the U.S. response to the coronavirus, adding that he expected lawmakers to authorize about $8.5 billion.
The Fed's announcement largely validated expectations from investors for aggressive policy action, said Candice Bangsund, a global asset allocation strategist at Fiera Capital in Montreal.
"It's become increasingly clear that policymakers have made stemming the damage from the outbreak a priority, which should help to place a floor under risky assets in the near-term," Bangsund said.
Shares in Europe rose more than 2%, while MSCI's all-country world index rose almost 1%.
The Group of Seven finance officials said in Tokyo they would use all appropriate policy tools to achieve strong, sustainable global growth and safeguard against downside risks posed by the coronavirus. Fed's rate cut and the G7 statement came after global stocks last week suffered their worst rout in a decade on fears that disruptions from the epidemic to supply chains, factory output and global travel could seriously slow the world economy.
"The G7 is essentially trying to reassure markets but it doesn't have the ability to really impact interest rates directly," said Randy Frederick, vice president of trading and derivatives for Charles Schwab (NYSE:SCHW) in Austin, Texas.
MSCI's gauge of stocks across the globe .MIWD00000PUS shed 1.10% and emerging market stocks rose 0.92%.
The pan-European STOXX 600 index .STOXX rose 1.37%
The Dow Jones Industrial Average .DJI fell 745.82 points, or 2.79%, to 25,957.5, the S&P 500 .SPX lost 81.08 points, or 2.62%, to 3,009.15, and the Nasdaq Composite .IXIC dropped 260.59 points, or 2.91%, to 8,691.58.
Gold surged. U.S. gold futures GCv1 settled 3.1% higher at $1,644.40 an ounce.
The dollar fell across the board.
The dollar index =USD fell 0.415%, with the euro EUR= up 0.46% to $1.1183. The Japanese yen JPY= strengthened 1.01% versus the greenback at 107.25 per dollar.
Oil prices closed mixed.
Brent crude LCOc1 fell 4 cents a barrel to settle at $51.86, off a session high of $53.90 hit immediately after the rate cut. U.S. West Texas Intermediate (WTI) CLc1 added 43 cents a barrel to settle at $47.18, after trading as high as $48.66 a barrel.
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