GLOBAL MARKETS-Stocks surge, dollar falls on world stimulus hope

* BOJ surprises markets with aggressive easing measures

* World stocks rise on further stimulus hopes, US data

* US dollar falls broadly on money supply concerns

* Gold hits record high, commodities rise

(Updates with European markets close, data)

By Manuela Badawy

NEW YORK, Oct 5 (Reuters) - World stocks surged and the U.S. dollar fell broadly on Tuesday after the Bank of Japan unexpectedly cut interest rates, fueling speculation that other governments will take additional actions to reinvigorate the global economic recovery.

Gold hit another record high above $1,340 an ounce, copper rose to its highest since July 2008 and oil rose to a two-month high as the dollar, driven by investor concern over the outlook for global growth, continued to weaken.

Risk assets soared on encouraging U.S. services sector data, the BOJ's rate cut and the Reserve Bank of Australia's decision not to raise rates, raising investor hopes that cheap money will flood global economies. The Federal Reserve has suggested it may engage in further quantitative easing unless the U.S. economic outlook improves.

"Additional quantitative easing from the (Fed) remains the market's preoccupation, and one that was given further fuel with the overnight decision of the Bank of Japan to cut its overnight rate," said David Ader, head of government bond strategy at CRT Capital Group in Stamford, Connecticut.

The BOJ's measures -- cutting its overnight rate target to virtually zero and pledging to buy 5 trillion yen ($60 billion) worth of assets -- pushed the Nikkei average <.N225> to close 1.5 percent higher. For details, see [ID:nTOE69305D]

Tokyo's action came after Fed Chairman Ben Bernanke said on Monday that more asset purchases could further ease financial conditions and help the economy. [ID:nN04133934]

The euro jumped to its highest since February against the dollar on concerns that further U.S. quantitative easing could undermine dollar strength.

U.S. stocks rose after data showed the pace of growth in the U.S. services sector, which accounts for 80 percent of U.S. jobs, accelerated last month more quickly than economists had expected and hiring also picked up. [ID:nN05177294]

The Dow Jones industrial average <.DJI> was up 163.89 points, or 1.52 percent, at 10,915.16. The Standard & Poor's 500 Index <.SPX> was up 20.22 points, or 1.78 percent, at 1,157.25. The Nasdaq Composite Index <.IXIC> was up 47.09 points, or 2.01 percent, at 2,391.61.

"Given unemployment and the state of the housing market, central banks didn't have a choice but to take steps like this, and it's what the market wanted to see," said Uri Landesman, president at the New York-based Platinum Partners. "This could be a sign of things to come."

The pan-European FTSEurofirst 300 <.FTEU3> index of top European shares closed up 1.4 percent at 1,066.12 points.

World stocks measured by the MSCI All-Country World Index <.MIWD00000PUS> rose 1.61 percent, while the Thomson Reuters global equity index <.TRXFLDGLPU> rose 0.16 percent.

DOLLAR SUFFERS

In currencies, a dollar index <.DXY> was down against major currencies, falling 0.74 percent to 77.865 after hitting an 8-1/2 month low. The euro was up 1.05 percent at $1.3823 after climbing as high as 1.3830. Against the Japanese yen, the dollar was down 0.04 percent at 83.31 after going as low as 82.96 yen on electronic trading platform EBS .

The prospect of further quantitative easing from the Fed modestly supported U.S. Treasury prices somewhat.

The benchmark 10-year U.S. Treasury note was up 3/32, with the yield at 2.467 percent. The 2-year U.S. Treasury note was unchanged with the yield at 0.411 percent. The 30-year U.S. Treasury bond was down 4/32, with the yield at 3.716 percent.

The Australian dollar fell 0.9 percent to $0.9594 after its central bank left interest rates steady for a fifth month, confounding expectations of a rise [ID:nSGE69401B].

Some analysts said the Australian dollar's recent strength might have given the Reserve Bank of Australia reason to pause, while speculation of U.S. and British quantitative easing may have made it cautious.

Central banks in Japan, the United States and Britain have been under political pressure to do more to support economies showing only tepid recovery from the worst recession in decades.

In Japan, slowing export growth, a surprise fall in factory output and companies' worries about the strong yen have strengthened the case for the BOJ to ease policy. Last month the authorities intervened in the currency market to curb the yen's strength.

The U.S. currency has fallen 10 percent this year against the yen.

Governments' ultra loose monetary policies may debase the value of currencies and are leading to continued demand for gold and the rise of other commodities.

Gold was pushed higher by concern about more monetary easing and possibly higher long-term inflation. The precious metal hit another record high bid at $1,341.20 an ounce. Oil prices rose more than 1 percent to $82.58 a barrel, and copper prices rose to $8,197 per tonne. Tin rose to a new all-time high at $26,000 a tonne, platinum, aluminium, zinc, lead and nickel touched multi-month highs.
Global interest rates: http://link.reuters.com/wed86p BOJ policy rate: http://link.reuters.com/syz76p Yen - taking on the market: http://r.reuters.com/fac44p BOJ balance sheet/JGB buying: http://link.reuters.com/ger94p RBA rates and commodity index: http://link.reuters.com/byg86p Chronology of BOJ policy moves: [ID:nTOE685013]
(Additional reporting by Chris Reese, Ryan Vlastelica in New York and Dominic Lau in London; Editing by Kenneth Barry)