* European shares gain, FTSE catches up after Monday gains
* Wall Street expected to open higher
* Japan's Nikkei touches new 7-week intraday high
* Euro under pressure on bets of ECB will ease further
* Market reaction to Ukraine air strikes limited
By Marc Jones
LONDON, May 27 World shares were just shy of a
record and the euro was being squeezed on Tuesday, on
expectations the European Central Bank will extend more than
five years of easy monetary policy when it meets next week.
U.S. markets were set to catch up when they reopen after
Monday's holidays. Futures prices point to 0.4 to 0.5 percent
gains for Wall Street that would also nudge MSCI's all-world
share index close to its 2007 record high.
Asset markets remain supported by record-low interest rates
in the world's big economies as they recover from the financial
ECB chief Mario Draghi on Monday bolstered the view that the
bank will cut euro zone interest rates again next week.
Other policymakers drove home the message on
The ECB has discussed "a situation where inflation rates are
so low that there is a danger of economic growth being held
back," Austrian ECB policymaker Ewald Nowotny said. "We will
discuss which measures we can take here."
British markets were also closed on Monday, and on Tuesday
Britain's FTSE 100 led the way in Europe. It rose 0.3
percent, compared with a 0.2 percent higher but record-high DAX
and 0.1 percent lower CAC40 in France.
The likelihood of lower rates also helped euro zone bonds
from Germany to Italy, Spain
and Greece. The euro came
under pressure again as it dipped to $1.3625.
As well as a rate cut, the ECB is preparing a package of
other easing measures, Reuters reported earlier this month. They
include charging banks a penalty if they hoard cash and targeted
measures aimed at boosting lending to smaller firms.
"The euro's inability to hold on to the early gains is
striking," said Nick Parsons, global head of forex for National
Australia Bank in London. "What I increasingly hear from
investors and clients is that whatever Mr Draghi does next week
will be seen as a disappointment, but they are not prepared to
hold a longer euro position into that."
Draghi said on Monday that the ECB needed to be
"particularly watchful" for any negative price spiral in the
euro zone, and that "more pre-emptive action may be warranted."
He is set to speak again later on the final day of an ECB forum
underway in Portugal.
Interest rates on benchmark 10-year German Bunds hovered at
1.358 percent. Italian bonds consolidated gains
from Monday after Italy's government scored a surprisingly easy
win in European Parliament elections over the anti-establishment
The euro's early afternoon slump helped the dollar recover
from a 0.2 percent loss against a basket of currencies
earlier after another retreat in U.S. bond yields.
London-based analysts and traders said another big batch of
U.S. economic numbers were the best bet for a bigger
market move on Tuesday after a tight few days of trading,
thinned out by the U.S. and UK holiday weekends.
Stronger-than-expected durable goods data helped the
greenback. Sterling sank as much as 0.4 percent against
the dollar and euro as soft lending data in Britain added to
concerns over a European election win for the anti-EU UKIP
Asian trading had been largely timid, although Japan's
Nikkei and shares in China saw another solid session.
A flurry of merger activity provided additional support for
Europe. Intercontinental Hotels Group jumped 4.5
percent, the top performer on the pan-European FTSEurofirst 300
, buoyed by British media reports of bid interest from
the United States.
However, investors were keeping a wary eye on Ukraine, which
launched air strikes and a paratrooper assault against
pro-Russian rebels who seized an airport on Monday.
The escalation was tempered by a decisive win for
billionaire Petro Poroshenko in Ukraine's weekend presidential
election, which many hope will stabilise the situation.
In commodities trading, three-month copper on the London
Metal Exchange edged to its highest in nearly three
months as markets reopened after a holiday weekend.
U.S. crude futures were flat at $104.27 a barrel.
Spot gold was roughly $16 an ounce lower at $1,276.65.
(Additional reporting by Lisa Twaronite in Tokyo and Patrick
Graham in London Editing by Larry King)