GLOBAL MARKETS-Global stocks extend rally, oil edges off 11-year low

* European shares follow Asia higher as stocks rise for
third day
* Wall St set to open higher
* Oil rises off Tuesday's 11-year low
* Dollar slightly higher against major rivals

By Nigel Stephenson
LONDON, Dec 23 (Reuters) - Global stocks extended a rally
into a third day on Wednesday as oil edged away from 11-year
lows and the dollar eked out minor gains in trade gradually
winding down for the holidays.
European shares rose sharply on the last full trading day
before the Christmas break, following Asian bourses higher.
Wall Street looked set to open modestly higher, according to
index futures.
The pan-European FTSEurofirst 300 index .FTEU3 rose 2.2
percent, with miners, which rallied on higher copper prices,
among the top gainers. London-listed Anglo American AAL.L rose
8 percent while Glencore GLEN.L and BHP Billiton BLT.L both
rose more than 6 percent.
"We think commodities are due for a bounce, and that should
help mining stocks," HED Capital managing director, Richard
Edwards, said.
MSCI's broadest index of Asia-Pacific shares outside Japan
.MIAPJ0000PUS rose 0.7 percent to the highest in almost two
weeks. Tokyo markets were closed for the Emperor's Birthday
holiday.
In China, the blue-chip CSI 300 index .CSI300 broke a
four-day winning streak and closed down 0.3 percent while the
Shanghai Composite index .SSEC ended down 0.4 percent.
State news agency Xinhua said slashing China's excess steel
capacity would be a top priority for the government over the
next five years.
MSCI's all-country world stocks index .MIWD00000PUS was up
0.36 percent, though it is down 4.5 percent for the year.
Oil prices rose off lows plumbed earlier in the week. Brent
crude LCOc1 , the global benchmark, stood at $36.65 a barrel,
up 54 cents, still close to an 11-year low of $35.98 touched
late on Tuesday.
The dollar strengthened versus the euro and held broadly
steady against a basket of major currencies.
The euro EUR= fell 0.3 percent to $1.0922 while the
Japanese yen JPY= gained 0.2 percent to 120.88 per dollar.
The euro has performed well this year at times of risk
aversion, as investors have unwound carry trades in which the
euro is borrowed then sold for higher-yielding currencies.
"When you are in an environment where rate expectations are
stable, the euro is mostly driven by risk sentiment," said
Credit Agricole (PA:CAGR) currency strategist Manuel Oliveri in London.
"So we could imagine that the euro goes to $1.10 or so into
the end of the year,"
Yields on low-risk government bonds were little changed.
German 10-year Bunds DE10YT=TWEB , the euro zone benchmark,
yielded 0.62 percent, up 2 basis points on the day.
In positive news for bond investors, a closely watched
measure of long-term inflation expectations in the euro zone
fell to its lowest in more than two months.
The five-year, five-year breakeven forward EUIL5YF5Y=R , a
gauge of where markets expect 2025 euro zone inflation forecasts
to be in 2020, fell to 1.6625 percent, its lowest since
mid-October.
Gold XAU= traded at $1,071.60 an ounce.