By Herbert Lash
NEW YORK, Nov 6 (Reuters) - Global equity markets rose on
Wednesday on strong European economic data and talk the Federal
Reserve will hold interest rates near-zero longer than expected,
while the euro gained on speculation the European Central Bank
won't cut rates this week.
The euro rose broadly after stronger-than-expected German
industry orders affirmed expectations the ECB would keep rates
unchanged on Thursday despite a steep fall in inflation.
But the outlook for the euro has dimmed, with many market
participants expecting the ECB to strike a dovish tone at
Thursday's monetary policy meeting.
The euro climbed to the session's peak of $1.3547
and was last at $1.3529, up 0.41 percent. Against the yen, the
euro rose to session highs of 133.72, and was last at
133.37 yen, up 0.50 percent.
German Bund futures erased gains after Market News
International reported the ECB would avoid an imminent interest
rate cut, citing two 'Eurosystem' sources.
Bund futures settled down 1 tick at 141.15, after earlier
trading as high as 141.44.
Wall Street followed European stocks higher after John
Williams, president of the San Francisco Federal Reserve Bank,
said on Tuesday the Fed should wait for stronger evidence of
economic growth before paring its massive bond-buying program.
Two of the Fed's top staff economists made the case in new
research papers for more aggressive action by the U.S. central
bank to drive down unemployment by promising to hold interest
rates lower for longer.
The papers will be presented at an International Monetary
Fund conference in Washington on Thursday and Friday.
The Fed has concluded that its bond-buying is no longer that
effective, and the size of its balance sheet is getting to be
problematic, said Steven Einhorn, vice chairman at hedge fund
Omega Advisors Inc., which at the end of October oversaw about
$9.7 billion in assets.
'What's seeping into the market is the increasing likelihood
they will keep zero percent interest rates for 18 months longer
than they had signaled previously,' Einhorn said, referring to
'What the market is beginning to reflect is a further
increased dovishness on the part of an already dovish Fed.'
All three major U.S. stock indexes initially rose, but the
Nasdaq later retreated, with a 15.4 percent decline in shares of
Tesla Motors Inc the biggest drag after it reported
weaker-than-expected earnings late Tuesday.
The Dow Jones industrial average was up 102.01
points, or 0.65 percent, at 15,720.23. The Standard & Poor's 500
Index was up 6.21 points, or 0.35 percent, at 1,769.18.
The Nasdaq Composite Index was down 9.00 points, or 0.23
percent, at 3,930.86.
In Europe, the FTSEurofirst 300 of leading regional
shares rose 0.39 percent to close at 1,296.58, after briefly
touching 1,300 for the first-time since early June 2008.
Estimate-beating earnings from financial conglomerate ING and staffing firm Adecco, among other
corporate results, gave fresh impetus to the largely
The euro zone's economy lost a little momentum last month,
according to surveys that showed only modest growth in German
and French businesses. But data from non-euro zone Britain
impressed again and German industrial orders jumped, underlining
the uneven nature of the region's recovery.
U.S. government debt traded mixed. The benchmark 10-year
U.S. Treasury note was up 5/32 in price to yield
2.6439 percent, while the 30-year bond was down.
Brent oil rose toward $106 a barrel, supported by an
unexpectedly large fall in U.S. gasoline stocks and worries
about prolonged supply weakness from Libya as the peak northern
hemisphere winter heating season looms.
Brent crude gained 40 cents to $105.73 a barrel.
U.S. oil rose $1.68 to $95.05.
Data from the Energy Information Administration (EIA) showed
U.S. gasoline stocks had fallen by 3.8 million barrels last
week, compared with forecasts in a Reuters poll for a 300,000
(Additional reporting by Marc Jones in London; Reporting by
Herbert Lash; Editing by Chris Reese and Meredith Mazzilli)
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