GLOBAL MARKETS-Stocks rise on Ukraine diplomacy, ECB easing speculation
* Stocks rise on efforts to resolve Ukraine crisis, ECB
* European shares have reversed all of Monday's selloff
* Euro steady, speculation ECB will unveil new measures
LONDON/PARIS, March 6 (Reuters) - World shares rose on Thursday, supported by diplomatic efforts to cool the crisis in Ukraine, while the euro held steady on speculation the ECB could take fresh action to support the euro zone economy.
The European Central Bank is expected to keep interest rates on hold but loosen lending conditions to ward off the threat of excessively low inflation and underpin a fragile recovery. Its decision is due at 1245 GMT.
The Bank of England, also meeting on Thursday, kept interest rates unchanged, seeking to give the economy more time to build momentum before removing its stimulus.
European shares climbed, led by peripheral euro zone markets such as Portugal, Spain and Italy, with the region's blue-chip Euro STOXX 50 index gaining 0.6 percent.
The index, up 3.3 percent in three days, has now reversed all the losses suffered on Monday when escalating East-West tensions over Ukraine sparked a sharp sell-off.
"European stocks have been quite resilient in the face of the multiple shocks, from the Fed's tapering to the Ukrainian crisis, even though risks seem limited," Banque Leonardo strategist Francois Chevallier said.
The euro held steady against the dollar, having earlier slipped to its lowest this month.
Emerging stocks and currencies were broadly higher as diplomatic talks to moderate the crisis in Ukraine were set to continue, having made little apparent progress on Wednesday.
European Union leaders meeting in Brussels on Thursday were set to warn but not sanction Russia, whose forces have seized control of Ukraine's Crimea region, diplomats said.
But on the ground, the situation remained tense, with Crimea's parliament voting to join Russia, and its Moscow-backed government setting a referendum within 10 days on the decision.
"The worst case scenario on Ukraine has been avoided but clearly discussion will continue for some time and there is scope for instability in Ukraine for the time being," said Nick Stamenkovic, a bond strategist at RIA Capital Markets in Edinburgh.
Overall, MSCI's world equity index, which tracks shares in 45 countries, was up 0.3 percent, and the MSCI emerging market index was up 0.8 percent.
With investors' immediate fears of military confrontation reduced, attention shifted to what action the ECB might take.
On Wednesday, International Monetary Fund officials called on the ECB to start buying public and private assets or extend more cheap long-term loans to banks, as well as cutting interest rates to a new record low.
Yet the ECB may hesitate to buy government bonds, unlike other major central banks such as the U.S. Federal Reserve and the Bank of Japan, in part for fear such a step could violate its ban on financing governments directly.
Other options include cutting rates or, more likely, stopping "sterilisation" operations that soak up the money it spent buying the bonds of Greece and other countries at the height of the euro zone sovereign debt crisis.
DOVISH STANCE EXPECTED
"If there is no rate cut today, we expect serious dovish talking from (ECB President Mario) Draghi in addition to any 'softer' action," Commerzbank strategists said in a note.
The euro traded at $1.3745, almost flat on the day, having fallen as low $1.3707 earlier and off a two-month high of $1.38255 hit on Friday.
With tension over Ukraine reduced, the dollar strengthened versus the safe-haven yen. It was last up about half a percent at 102.72 yen.
German Bund futures fell and cash bond yields rose . U.S. Treasury prices fell, with 10-year notes yielding 2.71 percent, up 1.4 basis points, largely ignoring soft U.S. jobs data.
A report from payrolls processor ADP showed private employment rose by a tepid 139,000 jobs last month, with jobs growth in January revised down sharply to 127,000 from 175,000.
The more important U.S. non-farm payrolls report for February is scheduled for release on Friday.
Gold traded in a right range with investors awaiting cues from the U.S. jobs data and developments in Ukraine. It last stood at $1,333.61 an ounce. Brent crude futures dipped, down 14 cents at $107.62 a barrel.
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