* ECB predicts euro-zone weakness, hitting euro, oil prices
* U.S. stocks rise as investors keep eye on 'fiscal cliff'
* Europe's FTSEurofirst 300 index up 0.7 pct - an 18-month
By Herbert Lash
NEW YORK, Dec 6 Oil prices slipped and the euro
fell in its sharpest drop in a month on Thursday after the
European Central Bank said growth in the euro zone is likely to
shrink next year, sparking speculation of an interest-rate cut.
But global shares rose, with the three major U.S. stock
indexes getting a modest lift as investors watched for signs of
progress in the "fiscal cliff" talks and Apple's stock rebounded
a day after its worst one-day percentage loss in nearly four
years. The FTSEurofirst-300 Index closed at an 18-month high.
German bonds rallied and Brent crude oil fell below $107 a
barrel after ECB President Mario Draghi said policy-makers held
a wide discussion on interest rates, leaving the door open to a
possible cut in borrowing costs next year.
The ECB left rates on hold, but the bank's new staff put
projections on gross domestic product in a range of a declining
0.9 percent to growing just 0.3 percent next year, suggesting
contraction is far more likely than not.
"The underlying reason for euro weakness is still there, and
the ECB's warnings of continued weakness over the next year
could be the catalyst for a continued euro drop," said Neal
Gilbert, market strategist at GFT in Grand Rapids, Michigan.
The euro fell 0.84 percent to $1.2956, while the U.S.
dollar index rose 0.65 percent to 80.295.
Brent crude was down $1.97 at $106.84.
The March 2013 Bund future, which became the
front-month contract during the session, rallied more than half
a point to a session high of 145.74. Yields on the 10-year
German bond fell to 1.29 percent, their lowest
since late August.
U.S. stocks edged higher in choppy trading, but traders kept
an eye on Washington and negotiations to avert some $600 billion
of tax hikes and spending cuts scheduled to start in January if
Congress fails to reach an agreement on deficit reduction.
President Barack Obama takes his "fiscal-cliff" campaign to
the home of a family in northern Virginia to illustrate the
impact of letting taxes on the middle class rise as signs emerge
that Republicans are contemplating a change in strategy in their
battle with Democrats over deficit reduction.
The office of U.S. Senator Jim DeMint, a conservative
Republican from South Carolina and a favorite of the Tea Party
wing of the party, said he will resign in January to run the
Heritage Foundation, a conservative think tank.
Upbeat guidance from Broadcom and Apple's turnaround helped
lift technology stocks. Apple erased initial losses of as much
as 3.7 percent at the open, which briefly pulled its market
capitalization below $500 billion, to climb 1.66 percent to
"It's really being held hostage to (the fiscal cliff
negotiations) and the stock action of Apple," said Bruce Zaro,
chief technical strategist at Delta Global Asset Management in
The number of Americans filing new claims for unemployment
benefits last week fell to the pre-Superstorm Sandy range,
suggesting a return to modest job growth after a storm-related
setback. It was the third straight weekly
The Dow Jones industrial average was up 15.30 points,
or 0.12 percent, at 13,049.79. The Standard & Poor's 500 Index
was up 2.91 points, or 0.21 percent, at 1,412.19. The
Nasdaq Composite Index was up 15.88 points, or 0.53
percent, at 2,989.58.
MSCI's all-country world equity index rose 0.2 percent to
333.56, while European stocks hit fresh 2012 highs and some
traders eyed more rallies after equity indexes broke key
The FTSEurofirst 300 index of top European shares
hit an 18-month closing high at 1,131.85, up 0.69 percent for
the day, with bullish technicals, an improving global outlook
and attractive valuations raising equities' appeal.
"We still have some risks, but the magnitude of the risks
has diminished and they are being handled in a better way," said
Ben Hauzenberger, a fund manager at Zurich-based Swisscanto
Benchmark U.S. Treasury yields dipped to near their lowest
in three weeks, supported by expectations that the Federal
Reserve will announce a new bond-purchase program when it meets
The benchmark 10-year U.S. Treasury note rose
6/32 in price to yield 1.57 percent.
Crude oil also faced pressure after a U.S. inventory report
showed big builds in oil products, with gasoline stocks up by
the highest margin since September 2001, surging 7.86 million
barrels to 212.12 million barrels in the week to Nov. 30.
U.S. crude futures fell $1.86 to $86.02 a barrel.