* Euro on back foot ahead of ECB policy meeting
* European stocks up 0.4 percent, bond yields nudge up
* Dollar near 12-1/2-year high after Fed hike talk
* Precious and industrial metals languish
By Marc Jones
LONDON, Dec 3 (Reuters) - Investors were hoping for another
bit of Mario Draghi magic on Thursday, after risk assets were
left bruised by comments from the head of the Federal Reserve
that she was "looking forward" to hiking U.S. rates.
European stocks .FTEU3 were 0.4 percent higher and the
euro EUR= was hovering near a 7-1/2-year low with Draghi
expected to expand the European Central Bank's money printing
programme later and cut its deposit rate again.
It followed a fresh spurt by the dollar .DXY overnight
that had sent gold XAU= to a new 5-1/2-year low and other
commodity and emerging markets .MSCIEF tumbling again.
The move had been triggered by Fed head Janet Yellen who had
said on Wednesday that raising U.S. rates, something it is
expected to do for the first time in nearly a decade on Dec. 16,
would be proof of the economy's recovery.
"When the Committee begins to normalize the stance of
policy, doing so will be a testament ... to how far our economy
has come," she said, referring to the Fed's policy-setting
committee. "In that sense, it is a day that I expect we all are
looking forward to."
It left the focus firmly on the ECB's moves later and
traders wondering whether whatever comes out of Frankfurt will
be able to offset the impact of higher Fed interest rates, which
tend to drive borrowing costs globally.
"Draghi is going to have to keep doing what he can," said
Didier Saint-Georges, managing director of fund manager
Carmignac.
"But the impact of central banks is meeting the wall of
diminishing returns... so he will have to do more and more and
more and even then it won't have the same effect."
The ECB will announce its decision on rates at 1245 GMT and
any new bond buying plans at its 1330 GMT news conference.
Money markets are pricing in a cut of at least 10 basis
points in the ECB deposit rate to minus 30 basis points, while
economists in a Reuters poll expect an increase in asset buying
to 75 billion euros a month from 60 billion euros.
Short-term German yields were pinned near record lows in
deep negative territory as the expectations mounted.
Longer-dated 10-year yields were marginally higher across the
region though having been dragged up by Yellen and U.S. yields.
COMMODITIES CRUNCHED
The euro fell 0.6 percent to $1.0553, while the
dollar index .DXY , which measures the greenback against 6 top
world currencies, was hovering just below a 12-1/2-year high of
100.51 .DXY it had hit overnight.
In Asia, shares had been under pressure after a sharp fall
on Wall Street on Tuesday. MSCI's main regional index ex Japan
.MIAPJ0000PUS fell 0.4 percent as Tokyo's Nikkei .N225 also
ending flat. .T
Australian shares .AXJO fell 0.6 percent and South
Korea's Kospi .KS11 shed 1 percent. Shares in Hong Kong,
Malaysia and Singapore also declined although Shanghai
brushed off disappointing services sector data to close 0.7
percent higher.
In commodities, crude oil bounced modestly on bargain
hunting following its tumble overnight prompted by surging U.S.
stockpiles and the stronger dollar.
U.S. crude CLc1 was up 1.2 percent at $40.43 a barrel
after dropping 4 percent overnight. Crude was still capped with
OPEC widely expected not to opt for a production cut at Friday's
meeting despite a global supply glut.
Industrial metals also remained under pressure amid global
oversupply and shrinking Chinese demand, with spot iron ore
prices plumbing 10-year lows this week.
Copper on the London Metal Exchange was down 0.5
percent at $4,540.50 a tonne as it edged back towards a 6-year
low as this week's pleas for Chinese government intervention
providing little tonic.
(Additional Reporting by Shinichi Saoshiro in Tokyo; Editing by
Toby Chopra)