World stocks dropped from earlier all-time highs on Thursday while the dollar rebounded from a record low after the Federal Reserve made a widely-expected U.S. interest rate cut and moderated expectations of further easing.

Oil briefly topped above $96 a barrel after an unexpected sharp fall in U.S. crude stocks, while gold hit a 28-year high, bolstered by the still weak dollar. Surging commodity prices lifted emerging market stocks, which also hit an all-time high.

Risky assets rallied on Wednesday after the Fed's interest rate cut to 4.5 percent followed data showing surprising strength in U.S. economic growth and employment.

But investors shifted focus to the Fed's assessment that the risk of inflation was about equal to downside risks to growth, suggesting that further rate reductions were far from sure.

The (Fed) statement was playing down the chance of another cut this year and European markets are having a bit more time to think about it, said Ian Williams, strategist at Blue Oar Securities. Most forward-looking data is still negative. We've got through the worst of the jitters in the credit market but there is a lot of concern about general global growth.

The FTSEurofirst 300 index was down 0.3 percent on the day while the MSCI main world equity index was down 0.1 percent, having earlier hit a record high.

The euro was down 0.3 percent at $1.4434 after hitting a record high above $1.45 on Wednesday, bringing its gains since January to 9 percent.

Interbank lending rates for three-month dollar deposits were indicated at a 1-1/2 year low around 4.7 percent following the rate cut, according to Reuters data. The rates have been coming down steadily before the Fed's rate decision.

(The fall in dollar rates) is by no means a sign that the credit crunch is easing, rather an indication that the move was fully discounted by market participants, Nick Parsons, head of markets strategy at nabCapital, said in a note to clients. We see little scope for the dollar Libor-funds spread to narrow below 30bp.

U.S. light crude was up more than 1 percent at $95.69 a barrel after surging above $96 earlier. Gold rose to $799.30 an ounce, its highest since January 1980.

High crude oil prices mean high gold prices, and in addition to this you have the weak dollar which completes the scenario for a bull run, said Koji Suzuki, market analyst at Kazaka Commodity Co Ltd in Tokyo.

The iTraxx Crossover index, mostly-widely watched indicator of European credit market sentiment, widened 6 basis points.

Emerging market stocks hit a record high while emerging sovereign spreads widened 3 basis points. The December Bund future was down 0.6 percent.

Inflation