GLOBAL MARKETS-Euro rises as ECB rate cut seen unlikely, Dow at record high

Wed Nov 6, 2013 4:46pm EST

* Euro regains footing; ECB under pressure to boost stimulus
    * Wall St gains on Fed rate expectations
    * Fed's Williams says wait for more evidence before tapering
    * European shares inch up to 5-year highs


    By Herbert Lash
    NEW YORK, Nov 6 (Reuters) - Global stock markets rose on
Wednesday and the Dow industrials marked a record closing high
as investors seized on signs that the Federal Reserve may keep
rates low for longer than expected.
    Strong data from Germany also cheered investors and stoked
speculation that the European Central Bank will not cut rates
when it meets on Thursday despite a steep decline in inflation.
    The expectations on the ECB lifted the euro 0.4 percent to
$1.3522, though traders said surveys showing only modest
growth in French and German businesses would likely cap the
currency's gains.
    Expectations on the Fed's path were influenced by remarks by
John Williams, president of the San Francisco Federal Reserve
Bank, who late on Tuesday said the Fed should wait for stronger
evidence of economic growth before winding down 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 notion of lower interest rates for longer helped lift
the Dow industrials to a record high, while a Reuters report
that Microsoft had narrowed its CEO search lifted
shares in the tech giant, buoying the S&P 500 index.
    "What's seeping into the market is the increasing likelihood
(the Fed) will keep zero percent interest rates for 18 months
longer than they had signaled previously," said Steven Einhorn,
vice chairman at hedge fund Omega Advisors Inc., which oversees
about $9.7 billion in assets.
    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, he added.
    The Dow Jones industrial average finished at a record
closing high, up 128.66 points, or 0.82 percent, at 15,746.88,
after earlier reaching a lifetime high of 15,750.29. The
Standard & Poor's 500 Index ended up 7.52 points, or 0.43
percent, at 1,770.49.
    A 14.5 percent plunge in shares of Tesla Motors Inc
, after the electric car maker gave a disappointing
outlook for its fourth quarter late Tuesday, weighed on the
Nasdaq Composite Index, which ended down 7.92 points, or
0.20 percent, at 3,931.95.
    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.
    MSCI's all-country world stock index rose
0.45 percent. 
    Estimate-beating earnings from financial conglomerate ING
 and staffing firm Adecco, among other
corporate results, gave fresh impetus to the largely
stimulus-driven rally. 
    U.S. government debt traded mixed. The benchmark 10-year
U.S. Treasury note was up 4/32 in price to yield
2.65 percent, while the 30-year bond was down in
price.
    "The market is trying to digest whether the new Fed makeup
and the new Fed thinking will be more prone to be keeping the
short rates lower for longer and not depend so much on QE," said
Vishal Khanduja, a portfolio manager with Calvert Investments in
Bethesda, Maryland.
    President Barack Obama nominated Fed Vice Chair Janet Yellen
last month to succeed Ben Bernanke when his term expires in
January.
    Brent oil settled down 9 cents at $105.24 a barrel, while
U.S. oil $1.52 to $94.89 per barrel.
    Data from the Energy Information Administration showed U.S.
gasoline stocks fell by 3.8 million barrels last week, compared
with forecasts in a Reuters poll for a 300,000 barrel decline.
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