GLOBAL MARKETS-Shares drift, dollar dips ahead of Fed decision

Wed Oct 30, 2013 12:52pm EDT

* Below-forecast U.S. jobs data supports dovish Fed

* World equities index hits highest in almost six years

* Brent up on Libya concern, WTI drops on U.S. inventories

By Rodrigo Campos

NEW YORK, Oct 30 (Reuters) - A gauge of global shares rose to its highest in almost six years on Wednesday on expectations that the Federal Reserve will keep its current stimulus program intact, while the U.S. dollar edged lower, giving support to gold and copper prices.

Many traders expect the U.S. central bank to signal later in the day, at the end of a two-day policy-making meeting, that it plans to keep in place a stimulus program that has lifted equities and other risk assets, and boosted Treasury bond prices while weighing on the U.S. currency.

Spot gold rose the most in a week after soft U.S. jobs data supported an expectation that the Fed will keep its $85 billion a month in bond purchases in place, in a bid to spark life into a lackluster economic recovery.

Data showed U.S. private-sector employers hired the fewest workers in six months in October, and that tepid domestic demand kept inflation benign last month, suggesting the economy was still in need of stimulus.

On Wall Street, the S&P 500 hit a fresh intraday record but indexes edged lower ahead of the Fed statement on its policy decision, expected at 2:00 p.m. EDT (1800 GMT).

Analysts warned that any hint that the Fed could trim back stimulus in the near future could prompt a negative market reaction, and noted that the recent rally had stretched valuations to a point that could encourage some profit-taking.

"I don't think anybody expects any surprise coming out of the Federal Reserve's meeting, everybody is just stepping back to make sure," said Hugh Johnson, chief investment officer of Hugh Johnson Advisors LLC in Albany, New York.

The Dow Jones industrial average fell 15.62 points, or 0.1 percent, to 15,664.73, the S&P 500 lost 3.85 points, or 0.22 percent, to 1,768.1 and the Nasdaq Composite dropped 13.25 points, or 0.34 percent, to 3,939.088.

Europe's broad FTSEurofirst 300 index reached its highest since mid-2008, buoyed by earnings, including those of Volkswagen and clothing retailer Next, before dipping less than 0.1 percent towards the close.

The MSCI world equity index hit an intraday level not seen since early 2008 and was last unchanged for the day.

DOLLAR DIPS WHILE GOLD, COPPER JUMP

Data showing that U.S. private-sector employers added 130,000 jobs in October, below expectations for a rise of 150,000, hurt the U.S. currency. The dollar dipped less than 0.1 percent against a basket of major currencies after gaining nearly 0.5 percent on Tuesday.

"The private sector jobs data reflects a labor market that shifted to lower gear in recent months and feeds into forecasts that the Fed will hold off on tapering until late in the first quarter of 2014," said Omer Esiner, chief market analyst at Commonwealth Foreign Exchange in Washington D.C.

Dollar sellers had driven the U.S. currency to nine-month lows by the end of last week, taking their lead from a steady decline in U.S. Treasury yields as investors anticipated and extended the period of Fed bond buying.

The 10-year Treasury note last traded up 9/32 in price with a yield of 2.4763 percent, near a three-month low of 2.471 percent hit last week.

The euro edged up 0.2 percent to $1.3768 after dropping the most in three weeks on Tuesday.

Spot gold rose the most in a week, also on expectations the Fed will keep buying bonds and pressuring the dollar. Gold was last up 0.8 percent near $1,354 an ounce.

Copper prices jumped 1.3 percent to $7,293 a ton.

Brent crude rose 0.4 percent to $109.44 a barrel as export disruptions in Libya continue to cut supplies to Europe and Asia, while the benchmark U.S. contract fell 1.2 percent to $97 a barrel after a bigger-than-expected increase in inventories in the United States.

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