GLOBAL MARKETS-World stocks up, US dollar down as central bank action eyed

Tue Apr 30, 2013 12:38pm EDT

* U.S. Midwest business activity contracts in April; US
dollar falls
    * Fall in euro zone inflation adds to rate cut case
    * Oil drops on growth worries


    By Caroline Valetkevitch
    NEW YORK, April 30 (Reuters) - Stocks on major markets edged
higher on Tuesday while the U.S. dollar fell to a two-month low
on expectations of further supportive actions by U.S. and
European central banks.
    Investors await the release of the Federal Reserve's policy
statement on Wednesday as well as the European Central Bank's
announcement on Thursday. Investors believe the Fed will
continue with its bond buying program in response to recent
weaker U.S. economic data, while the European Central Bank may
cut its benchmark interest rate. 
    U.S. Treasuries prices erased gains, as investors made room
for a six-part debt sale by Apple Inc. The technology
company has attracted more than $50 billion in orders for a
six-part debt sale expected to price later on Tuesday, according
to two market sources. 
    U.S. stocks were slightly higher after data showing an
unexpected contraction in business activity in the U.S. Midwest
was offset by a report showing U.S. home prices rose in February
at their fastest rate in almost seven years.  
    At the same time, the U.S. dollar was being driven by views
on the Fed as investors watch to see if the sluggish economic
recovery and slowing inflation could not only end talk of
slowing the Fed's bond-buying, but also push the Fed into buying
more assets.
    Weakness in the dollar "is mainly speculation on further Fed
quantitative easing policy," said Ulrich Leuchtmann, head of FX
research at Commerzbank. "The view that the Fed would scale down
QE is coming more and more under question due to poor U.S.
data."
    The dollar index, which measures its value against a
basket of six major currencies, earlier hit its lowest since the
end of February at 81.598. It was last down 0.5 percent at
81.729.
    The euro rose as high as $1.3185, the strongest since
April 17.
    On Wall Street on Tuesday, the Dow Jones industrial average
 was down 9.96 points, or 0.07 percent, at 14,808.79. The
Standard & Poor's 500 Index was up 0.64 points, or 0.04
percent, at 1,594.25. The Nasdaq Composite Index was up
10.54 points, or 0.32 percent, at 3,317.56.
    U.S. stocks have mostly rallied since the start of the year.
The S&P 500 closed at a record high on Monday.  
    MSCI's world equity index was up 0.3
percent, while the pan-European FTSEurofirst 300 index 
ended down 0.2 percent. Earlier, MSCI's broadest index of
Asia-Pacific shares outside Japan rose 1.1
percent to a seven-month high.
    In the U.S. Treasury market, the benchmark 10-year U.S.
Treasury note was down 2/32, with the yield at 1.6734 percent. 
    Apple is issuing three-year and five-year fixed and
floating-rate notes, as well as 10-year and 30-year fixed-rate
notes via Deutsche Bank and Goldman Sachs. The company is
expected to issue at least $15 billion in debt.
    
    EUROPEAN DATA WEAK; US DATA MIXED
    Data out of Europe on Tuesday bolstered views the ECB will
cut interest rates when it meets on Thursday.    
    Inflation in the euro zone hit a three-year low and
unemployment rose to a record high, the EU statistics office
reported. Adding to worries, German retail sales unexpectedly
fell in March while Spain's economy shrank for the seventh
straight quarter in the first three months of the year.
  
    "It's looking more and more likely that the European Central
Bank will indeed cut its main refinancing rate on Thursday while
the Federal Reserve will stand pat on Wednesday," said Brian J.
Jacobsen, chief portfolio strategist at Wells Fargo Funds
Management in Menomonee Falls, Wisconsin.
     A cut in the ECB benchmark rate by 25 basis points to a
record low of 0.5 percent after its policy meeting on Thursday
has been largely factored in by financial markets, though many
analysts and dealers still harbor some doubts it will happen.
    Only a narrow majority of 76 economists polled by Reuters
last week forecast a 25 basis point cut in the main rate to 0.5
percent on Thursday. A separate survey of money market dealers
showed they were evenly split on any move. 
 
    In the commodity markets the growth concerns, heightened by
the recent run of weak economic data around the world, largely
outweighed the hopes of further central bank support.
    Brent crude dropped $1.46 to $102.35 a barrel. U.S.
crude was $1.01 lower at $93.49 a barrel.
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