GLOBAL MARKETS-U.S. data, prospect of ECB easing feed risk appetite

Wed May 28, 2014 1:59pm EDT

* Risk appetite up, S&P 500 expected to extend record highs
    * European shares, bonds tread water
    * Gold steadies at 3-1/2-month low as safe-haven appeal dims
    * Euro at 3-month low as lending data back case for rate
cuts

 (Updates markets, changes byline)
    By Herbert Lash
    NEW YORK, May 28 (Reuters) - Global equity markets traded
flat on Wednesday as U.S. and German equities eased from record
highs, but risk appetite remained strong, knocking safe-haven
gold to a 3-1/2-month low.
    U.S. and European bond markets rallied, pushing yields down
to multi-month lows. Receding fears that big wins by anti-euro
parties in EU parliamentary elections might derail fiscal
reforms in weaker countries helped European bonds.
    The recent rally in equities has been supported by strong
U.S. economic data and expectations of monetary easing by the
European Central Bank. The benchmark S&P 500 hit yet another
intraday record early in the session before retreating.
    On Tuesday, gold posted its biggest daily fall since
mid-December after U.S. and German stocks set record highs.
    The 10-year U.S. Treasury note fell 21/32 in
price to yield 2.4431 percent, the lowest yield since last July.
    "We made a pretty decisive move above 1,900" on the S&P 500,
said Jim Paulsen, chief investment officer at Wells Capital
Management in Minneapolis.
    "Economic momentum is clearly to the upside at the moment,
the surprise index is up and that's pretty powerful for stocks,"
he said, referring to Citi's Economic Surprise Index, which
measures how well data performs relative to forecasts. "We've
had a constant stream of better-than-expected data and the bond
market has remained supportive."
    MSCI's all-country world equity index 
reversed course to turn slightly higher, rising 0.06 percent to
420.35 points, less than 2 percent below its life-time high.
    The FTSEurofirst 300 index of leading European
shares fell 0.07 percent to close at 1,377.83. 
    Wall Street traded mixed as the S&P rebounded a tad.
    The Dow Jones industrial average fell 14.75 points,
or 0.09 percent, to 16,660.75; the S&P 500 gained 1.21
points, or 0.06 percent, to 1,913.12; and the Nasdaq Composite
 dropped 1.527 points, or 0.04 percent, to 4,235.542. 
    The dollar rose on softness among other major currencies
such as the euro, which fell below $1.36 on gathering
expectations of an ECB monetary policy shift next week.
    The U.S. dollar index hit an eight-week peak of
80.581, reflecting a 0.29 percent decline for the trading day in
the euro against the U.S. currency. The index, a measure
of a basket of currencies, was last at 80.567 in New York trade,
up 0.27 percent.
    A rally in German Bunds spilled over to U.S. Treasuries.
German 10-year Bund yields, the benchmark for euro
zone borrowing, were down at 1.287 percent, a 2014 low.
    Yields fell after an unexpected increase in German
unemployment and a deceleration in the euro zone money supply.
The data reinforced expectations that the ECB will introduce
further stimulus at next month's meeting.
    Crude oil prices slid for a second straight day as the
stronger dollar and lower demand outweighed tensions in Ukraine
and Libya and positive economic data in the United States.
    Brent fell 8 cents to $109.94 a barrel, while U.S.
oil fell 64 cents to $103.47 a barrel.
    

 (Reporting by Herbert Lash; Additional reporting by Marc Jones
in London; Editing by Leslie Adler)
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