GLOBAL MARKETS-Fed support fails to pull stocks out of dive

* World FX rates in 2020 http://tmsnrt.rs/2egbfVh

By Marc Jones

LONDON, March 23 (Reuters) - Fresh support announced by the Federal Reserve failed to lift Wall Street on Monday, after Europe and Asia had both been overwhelmed by the coronavirus pandemic and growing number of national lockdowns that could push the global economy deep into recession.

European stocks had dived more than 4% in morning trade , futures had been more than 3% lower and commodity markets had also suffered more heavy selling before an announcement from the U.S. central bank at 1200 GMT.

The Fed said it would backstop an unprecedented range of credit for households, small and major firms to offset the "severe disruptions" caused by the virus. Purchases of U.S. Treasury and mortgage-backed securities will also be expanded as much as needed.

"It's their bazooka moment. It’s their 'We'll do whatever it takes' moment," said Russell Price, Chief Economist at Ameriprise Financial Services in Troy, Michigan.

"But quite frankly the market is just in a waiting period right now until the virus runs its course and some of the therapies and other treatments are able to improve outcomes."

Wall Street futures had been pointing higher after the moves, but the rally failed to materialise. The S&P 500, Dow Jones and Nasdaq were all 0.5% in the red after the first flurry of trades, and European bourses were down 2.5% to 3.5%.

Investors were still taking cover in ultra-safe government bonds and in the Japanese yen in currency markets. The euro also surged after the Fed's actions, but with widespread uncertainty about when any semblance of normality might return, there were few places to really hide.

"Further deterioration in the COVID-19 outbreak is severely damaging the global economy," Morgan Stanley analysts warned on Monday. "We expect global growth to dip close to GFC (global financial crisis) lows, and U.S. growth to a 74-year low in 2020."

Goldman Sachs sent a similar warning of a 1% drop in the global economy this year, too.

MSCI's main world stocks index was down 0.8% and almost at four-year lows.

UBS Australian head of equities distribution George Kanaan said global financial markets have been gripped by fear, which seemed unlikely to ease any time soon, despite the co-ordinated efforts of governments and central banks around the world.

"I have been in the financial markets for 27 years and I have never seen anything like this," he told Reuters by telephone from Sydney.

"First is that this involves masses of people. In the GFC, that was an event that occurred in the investment banks around the world, it didn’t involve people on the street. The second is that social media is helping to drive this fear and panic."

In Asian trade, MSCI's broadest index of Asia-Pacific shares outside Japan lost 5.4%, with New Zealand's market shedding a record 10% at one point as the government closed all non-essential businesses.

Shanghai blue chips dropped 3.3%, though Japan's Nikkei rose 2.0% aided by expectations of more aggressive asset buying by the Bank of Japan. In Australia, the S&P/ASX200 dropped 5.62% to take the index to a seven-year low.

Globally, analysts are dreading data on weekly U.S. jobless claims due on Thursday amid forecasts they could balloon by 750,000, and possibly by more than a million.

U.S. stocks have fallen more than 30% from their mid-February peak and even the safest areas of the bond market are experiencing liquidity stress as distressed funds are forced to sell good assets to cover positions gone bad.

In contrast to the response by authorities to the global health crisis, however, are calls from some on Wall Street to ease restrictions as soon as possible to give the economy room to recover.

"Extreme measures to flatten the virus 'curve' is sensible - for a time - to stretch out the strain on health infrastructure," former Goldman Sachs Chief Executive Lloyd Blankfein tweeted.

"But crushing the economy, jobs and morale is also a health issue - and beyond. Within a very few weeks let those with a lower risk to the disease return to work."

MOUNTING ECONOMIC TOLL

The mounting economic toll led to a major rally in sovereign bonds late last week, with efforts by central banks to restore liquidity in the market allowing for more two-way trade.

Yields on the benchmark U.S. 10-year note were down at 0.82%, having dived all the way to 0.84% on Friday from a top of 1.28%. European benchmarks like German Bunds were at around -0.37% down more than 20 bps from last week's 10-month highs.

Calls were continuing for the euro zone's 19 governments to issue the bloc's first joint bonds to try to get the region through the economic crush of the virus lockdowns.

In New Zealand, the central bank announced its first outright purchase of government paper aiming to inject much-needed liquidity into the local market.

In currency markets, the first instinct on Monday was to dump those leveraged to global growth and commodity prices, sending the Australian dollar down as much as 0.8% to $0.5749 .

The U.S. dollar started firm but then got sucked under by the Fed's measures. There were also still partisan battles in the U.S. Senate which had stopped a coronavirus response bill from advancing.

The dollar eased 0.5% to 110.31 yen while the euro shot up 0.8% to $1.0780 having been down at from $1.0635 at one point.

The dollar had been a major gainer last week as investors fled to the liquidity of the world's reserve currency, while some funds, companies and countries desperately sought more cash to cover their dollar borrowings.

The sudden drop in the dollar revived gold, which had slipped 0.3% to $1,493.83 per ounce.

Oil prices also pared some of their sharp losses with Brent crude futures clawing back up to $26.46 having been down almost 5% at one point at $25.66 a barrel.

(Reporting by Marc Jones; Editing by Ed Osmond and Hugh Lawson)