July 30, 2012 / 4:30 PM / 7 years ago

GLOBAL MARKETS-World stocks rise on stimulus hopes; euro falls

* European shares rally as ECB, Fed set to meet this week

* Euro slides on worries stimulus measures may disappoint

* U.S. stocks slip, reversing morning’s gains

* Oil drops, gold falls

By Caroline Valetkevitch

NEW YORK, July 30 (Reuters) - Global stocks rose on Monday on expectations of stimulus measures by the European Central Bank and the U.S. Federal Reserve to support struggling economies, but the euro slid against the U.S. dollar.

Both the ECB and the Fed will meet this week. The Fed will start a two-day meeting on Tuesday, with many economists believing the central bank will wait until September to provide more stimulus to a faltering U.S. economic recovery. The ECB’s meeting on Thursday will attract more attention, traders said, after ECB President Mario Draghi’s comments last week that the central bank would do whatever it takes to preserve the euro.

U.S. Treasury Secretary Timothy Geithner and Germany’s Finance Minister Wolfgang Schaeuble issued a joint statement after their meeting on Monday that emphasized “the need for policymakers to adopt and implement all reform steps required to deal with the financial crisis and crisis of confidence.”

The euro fell broadly, hitting a record low against the Australian dollar, on worries that the ECB may disappoint investors hoping for more measures to contain the debt crisis.

The euro lost 0.6 percent to $1.2241, retreating from a three-week high of $1.2390 hit on Friday.

“Clearly, if nothing is announced, that would be a massive disappointment,” said Callum Henderson, global head of FX research for Standard Chartered Bank in Singapore. “But there is an expectation that we’re going to see something meaningful on Thursday.”

Inflows into safe-haven German government bonds slowed, keeping prices close to three-week lows.

The rhetoric raised expectations that the ECB could take bold measures to lower Italian and Spanish borrowing costs that would also support riskier assets. Italy’s benchmark 10-year borrowing costs eased below 6 percent.

“Certainly everyone thinks that Europe is going to come out with this big bazooka, and they also think the Fed will launch, so therefore the market is going to stay up here,” said Ken Polcari, managing director, ICAP Equities in New York.

The rhetoric raised expectations that the ECB could take bold measures to lower Italian and Spanish borrowing costs that would also support riskier assets. Italy’s benchmark 10-year borrowing costs eased below 6 percent.

However, other investors doubt ECB policymakers will deliver in line with market expectations when they meet on Thursday, and this kept the euro lower and checked gains in commodity prices.

Speculation is growing that the Fed will do more to bolster the recovery after data showed U.S. second-quarter gross domestic product expanded at a 1.5 percent annual rate, the weakest pace of growth since the third quarter of 2011.

The MSCI world equity index rose 0.2 percent, extending gains for a third straight day.

The FTSEurofirst 300 index of top European shares advanced 1.6 percent to close unofficially at 1.073.19, just off a four-month high.


But Wall Street slipped on Monday after its best two-day run this year, with the three major U.S. stock indexes touching session lows as investors awaited action from the ECB and the Fed.

The Dow Jones industrial average slipped 21.53 points, or 0.16 percent, to 13,054.13. The Standard & Poor’s 500 Index shed 3.46 points, or 0.25 percent, to 1,382.51. The Nasdaq Composite Index declined 14.59 points, or 0.49 percent, to 2,943.50.

Germany’s Bundesbank is opposed to a resumption of the ECB’s secondary market bond buying as well as granting the euro zone rescue funds a banking license, which would give them more firepower to tackle the debt crisis.

Brent crude fell 52 cents to $105.95 a barrel, while U.S. crude slipped 40 cents to $89.73.

Spot gold declined 0.3 percent to $1,618.09 an ounce.

In the U.S. bond market, the benchmark 10-year U.S. Treasury note rose 10/32, with the yield at 1.522 percent.

“Treasuries are likely to remain locked in lower rate ranges as U.S. and global growth continues to disappoint,” said William O’Donnell, managing director and head of U.S. Treasury strategy at RBS in Stamford, Connecticut.

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