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GLOBAL MARKETS-Euro falls; strong dollar weighs on oil

Published 2015-11-25, 12:51 p/m
GLOBAL MARKETS-Euro falls; strong dollar weighs on oil
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* ECB weighs up new easing
* Wall St flat, European stocks rally

(Updates prices, changes comment, byline dateline)
By Rodrigo Campos
NEW YORK, Nov 25 (Reuters) - The dollar gained and the euro
fell as far as a seven-month low on Wednesday following a
Reuters report that the European Central Bank is weighing
further easing monetary policy soon, including buying more debt
and charging banks for hoarding cash.
The policy divergence between the ECB and the Federal
Reserve, which is seen raising rates as soon as next month,
helped propel the dollar index to its highest level since March,
which pushed oil and commodity prices sharply lower.
European stocks rallied and Wall Street was little changed,
leaving an MSCI measure of equities globally up 0.2 percent.
Data showed a decline in U.S. jobless insurance
applications, while business investment is poised to rise.

The Dow Jones industrial average .DJI rose 5.95 points, or
0.03 percent, to 17,818.14, the S&P 500 .SPX gained 0.27
points, or 0.01 percent, to 2,089.41 and the Nasdaq Composite
.IXIC added 11.17 points, or 0.22 percent, to 5,113.98.
European stocks rallied further and the FTSEuroFirst 300
index of leading shares was up 1.4 percent at 1,502.6 points
.FTEU3 .
"The bias of the ECB is to continue to lean toward a policy
of easing; with monetary policy being what it is it will
continue to keep equities as the asset class of choice," said
Matthew Kaufler, portfolio manager at Federated Investors in
Rochester, New York.
"Putting aside geopolitical risk, European markets will
continue to strengthen."
The backdrop of geopolitical risk was heightened earlier
this week after Turkey shot down a Russian fighter jet.
"The geopolitical situation is the risk that keeps me up at
night, as it continues to mutate in scary directions. It is
clearly the wild card," said Kaufler.
Russia said on Wednesday it will send an advanced air
defense system to reinforce its air base in Syria and consider
cancelling a raft of joint business projects with Ankara.

Volatility could also spike as low volumes are expected out
of the United States as it heads into the Thanksgiving holiday.
U.S. equity markets will close on Thursday and operate a half
day on Friday.

CENTRAL BANK ACTION LOOMS
At its meeting next week the ECB will ease policy in some
way or another, according to economists polled by Reuters, many
of whom say the bank cannot pull back now after signaling its
intentions so clearly over the past month.
Numerous alternatives are open, from snapping up the bonds
of towns and regions to introducing a two-tier penalty charge on
banks that park money with the ECB.
Fed officials, on the other hand, are already sketching out
positions for a post-liftoff debate that may blur the lines
between inflation "hawks" and "doves."
The euro hit a session low of $1.0565 but sharply reversed
losses and was last down 0.1 percent at $1.0631; the dollar
index reached a high of 100.17 and was last up 0.2 percent at
99.68.
The dollar strength, alongside concern over growing crude
supply, pressured oil prices lower.
U.S. crude fell 1.2 percent to $42.37 per barrel and Brent
dropped 1.5 percent to $45.42.
Prices of metals such as zinc and copper resumed their
recent downtrend. MET/L
U.S. bond prices reached session highs earlier as
shorter-dated German Bund yields DE2YT=TWEB DE5YT=TWEB fell
to record negative levels following the Reuters report on
expected ECB action.
Benchmark 10-year Treasuries notes US10YT=RR edged up 4/32
in price to yield 2.2289 percent, down 0.2 basis point from late
on Tuesday.
The two-year yield US2YT=RR was unchanged at 0.9343
percent, which was within striking distance of the 5-1/2-year
peak seen on Nov. 6.

(Editing by Richard Balmforth and Meredith Mazzilli; To read
Reuters Global Investing Blog click on http://blogs.reuters.com/globalinvesting;
for the MacroScope Blog click on http://blogs.reuters.com/macroscope;
for Hedge Fund Blog Hub click on http://blogs.reuters.com/hedgehub)

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