* European and U.S. markets head higher
* Dollar falls back after surge to 3-month high
* Mixed messages from global central banks dominate
* Company results prop up European shares
By Patrick Graham
LONDON, Nov 5 (Reuters) - European stock markets gained
while sterling sank on Thursday after the Bank of England poured
cold water on the idea that the road is clear for it and the
Federal Reserve to start raising interest rates shortly.
Asian markets ended mixed .MIAPJ0000PUS and oil
prices flat LCOc1 , but Wall Street looked set to open higher,
turning back falls a day earlier on signals the U.S. central
bank will seriously consider raising rates next month.
An adverse reaction from global markets to September's
policy meeting put the Fed off hiking when many had expected it
to, but there have been some signs this time that investors have
grown more sanguine about the likely fallout.
Bank of England chief Mark Carney, who had previously played
down threats to major economies from slowing growth in China and
other emerging markets, sent a surprisingly cautious message
that pointed to UK borrowing costs remaining on hold until 2017.
The pound fell a full cent against the dollar in response,
but the U.S. currency also handed back all of its gains in
morning trade to stand flat on the day.
"The Bank of England held off tightening today and arguably
had little choice but to, for as long as other central banks
around the world remain in delaying and/or stimulatory mode,"
said Charles Hepworth, Investment Director at asset manager GAM.
"While the U.S. is likely to be the first mover on interest
rate normalisation, the continuing recent delays from the Fed
have added further uncertainty to global central bank decision
making."
Data on Thursday showed that U.S. weekly jobless claims rose
by the most in eight months, while labour costs in the third
quarter rose far less than expected.
LIVE PROSPECT
The dollar had surged to a three-month high and Asian stocks
fallen earlier as expectations hardened of the first rise in
U.S. rates in almost a decade coming next month.
Federal Reserve chief Janet Yellen and two senior colleagues
pointed to December as a "live possibility" for a rise, adding
to signs that the Fed is again on the verge of moving after
months of vacillating over the domestic and global economy's
ability to deal with higher borrowing costs.
European stocks, after falling 0.1-0.3 percent in early
trade, were up around 0.1 percent, with both Frankfurt and Paris
around 1 percent higher, helped by strong results for sporting
goods maker Adidas (DE:ADSGN) and French bank Societe Generale (PA:SOGN).
According to data from Thomson Reuters StarMine, 50 percent
of European companies reporting so far this quarter have met or
beaten analysts' earnings forecasts.
"We find that investors have differentiated more between
winners and losers during the Q3 reporting season compared to
recent quarters," said JP Morgan analyst Emmanuel Cau.
"The stock prices of the companies beating estimates have
been strongly rewarded on the day, while the stocks missing
estimates have underperformed significantly."
The gap between U.S. and German two-year bond yields also
spread to its widest in nine years, reflecting expectations that
the European Central Bank is likely to head in the opposite
direction to the Fed in December.
"It looks like we have to seriously prepare for the prospect
of the two major central banks embarking on opposing paths of
monetary policy in December," ING's senior rate strategist
Martin van Vliet said.
After rising as high as $1.0834 per euro in early trade in
Europe, the dollar was roughly flat on the day. EUR= .DXY
The crunch now will be U.S. data over the next few weeks.
U.S. data on Wednesday supported Yellen's guarded optimism, with
private employers hiring steadily in October and a jump in new
orders buoying activity in the services sector.
Influential non-farm payroll numbers are due on Friday.