GLOBAL MARKETS-US stocks edge up, euro slips on ECB comments

Thu Dec 6, 2012 12:12pm EST

* ECB predicts euro zone weakness, hitting euro, oil prices

* U.S. stock waver as 'fiscal cliff' talks weigh on investors

* Europe's FTSEurofirst 300 index up 0.4 pct, near 2012 high

By Herbert Lash

NEW YORK, Dec 6 (Reuters) - U.S. shares edged higher on Thursday, lifted by a rebound in Apple, while the euro headed toward its sharpest drop in a month after the European Central Bank said growth in the euro zone is likely to shrink next year.

Brent crude oil fell below $108 a barrel after comments by ECB President Mario Draghi raised the prospect of further weakness in the euro zone and a bleaker outlook for oil demand.

U.S. stocks edged higher in choppy trading but traders kept an eye on Washington and negotiations to avert some $600 billion of tax hikes and spending cuts scheduled to start in January if Congress fails to reach an agreement on deficit reduction.

President Barack Obama takes his "fiscal-cliff" campaign to the home of a family in northern Virginia to illustrate the impact of letting taxes on the middle class rise as signs emerge that Republicans are contemplating a change in strategy in their battle with Democrats over deficit reduction.

The office of U.S. Senator Jim DeMint, a South Carolina conservative and favorite of the Tea Party wing of the party, said he will resign in January to run the Heritage Foundation, a conservative think tank.

Upbeat guidance from Broadcom and Apple's turnaround helped lift technology stocks. Apple erased initial losses of as much as 3.7 percent at the open, which briefly pulled its market capitalization below $500 billion, to trade up 2.17 percent to $550.47.

"There are no real triggers here," said Rick Meckler, president of hedge fund LibertyView Capital Management LLC, in Jersey City, New Jersey.

"It's the back and forth over the fiscal cliff discussions, the combination of people who are occasionally scared by the language expressed by politicians and the value buyers who see all this as a chance to get in at better prices."

The number of Americans filing new claims for unemployment benefits last week fell to the pre-superstorm Sandy range, suggesting a return to modest job growth after a storm-related setback. It was the third straight weekly decline.

The Dow Jones industrial average was up 7.57 points, or 0.06 percent, at 13,042.06. The Standard & Poor's 500 Index was up 2.38 points, or 0.17 percent, at 1,411.66. The Nasdaq Composite Index was up 18.58 points, or 0.62 percent, at 2,992.27.

MSCI's all-country world equity index rose 0.2 percent to 333.70, while European stocks hit fresh 2012 highs and some traders eyed more rallies after equity indexes broke key resistance levels.

The FTSEurofirst 300 index of top European shares hit an 18-month closing high, up 0.67 percent at 1,131.64, with bullish technicals, an improving global outlook and attractive valuations raising equities' appeal.

"We still have some risks, but the magnitude of the risks has diminished and they are being handled in a better way," said Ben Hauzenberger, a fund manager at Zurich-based Swisscanto Asset Management.

The pan-European FTSEurofirst 300 index earlier reached an intraday peak of 1,132.79 points, its best level for 2012.

German bonds rallied after Draghi said ECB policymakers had a wide discussion on interest rates, including cutting the rate on short-term deposits below zero, before deciding to keep its main rate at a record low 0.75 percent.

The March 2013 Bund future, which became the front-month contract during the session, rallied more than half a point to 145.72. Yields on the 10-year German bond fell to 1.29 percent, their lowest since late August.

The ECB's new staff projections put gross domestic product in a range of falling 0.9 percent to growing just 0.3 percent next year, suggesting contraction is far more likely than not.

U.S. benchmark Treasury yields dipped to near their lowest in three weeks, supported by expectations the Federal Reserve will announce a new bond purchase program when it meets next week.

The benchmark 10-year U.S. Treasury note was up 6/32 in price to yield 1.5704 percent.

Crude also faced pressure after a U.S. inventory report showed big builds in oil products, with gasoline stocks up by the highest margin since 2001, surging by 7.86 million barrels to 212.12 million barrels in the week to Nov. 30.

U.S. crude futures fell $1.88 to $86.00 a barrel, while Brent was down $1.29 at $107.52.

A couple walks along the rough surf during sunset at Oahu's North Shore, December 26, 2013. REUTERS/Kevin Lamarque

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