Global stocks rise, euro falls after ECB decision

By Natsuko Waki

LONDON (Reuters) - The euro fell and shares and government bonds rallied on Thursday as the European Central Bank poured cold water on speculation of further aggressive interest rate hikes after raising them as expected.

Stocks also recovered sharply from a global sell-off, which knocked world shares to a five-month low earlier, after U.S. jobs came largely in line with expectations.

The ECB became the first G7 central bank to raise interest rates since the credit crisis erupted last August, increasing the euro zone's benchmark cost of borrowing to 4.25 percent.

However, the euro fell broadly as investors scaled back further interest rate hikes after ECB President Jean-Claude Trichet told a news conference he had no bias on monetary policy.

"For now Trichet seems to be drawing a line under today's move," said Philip Shaw, chief economist at Investec.

"Things might change going forward, but for now there's nothing to suggest the ECB has an itchy trigger-finger."

The FTSEurofirst 300 index erased early losses to rise 0.2 percent, having fallen to a level not seen since July 2005 earlier. MSCI's main world equity index .MIWD00000PUS fell 0.5 percent to its lowest since January 23.

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