GLOBAL MARKETS-Euro rises on talk ECB rate cut unlikely, stocks gain
* Euro regains footing, but ECB under pressure to boost stimulus * Wall St gains on expectations Fed to keep rates at near zero * European shares inch up to new 5-year highs * Oil rises to $106/bbl, lifted by Libya, product supply drops 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 the Fed. "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 stimulus-driven rally. 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 barrel decline.
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