Stocks inch higher; euro falls on ECB easing bets

Reuters
Man looks at an electronic board displaying Japan's Nikkei average and various countries' stock indices outside a brokerage in Tokyo
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A man looks at an electronic board displaying Japan's Nikkei average (top C) and various countries' stock indices, as passers-by walk past outside a brokerage in Tokyo April 16, 2014. REUTERS/Toru Hanai

By Natsuko Waki

LONDON (Reuters) - European stocks followed Asia higher on Thursday while the euro fell as investors bet central banks in developed markets would continue their monetary support, with the European Central Bank poised to cut interest rates next month.

Emerging stocks were the biggest winners from expectations for more stimulus, hitting a 6-1/2 month high, while stronger-than-expected German first-quarter economic growth data pushed the benchmark German bond yield off one-year lows.

ECB President Mario Draghi signaled last week that the bank was poised to ease monetary policy next month to support the economy. Federal Reserve Chair Janet Yellen has said the U.S. economy needed support, while expectations have been growing China might unveil stimulus.

"There's a good chance we will see a small positive surprise in euro zone (growth) numbers," said Jan von Gerich, chief fixed income analyst at Nordea. "But I don't think we will see a big back-up in yields with ECB easing in the pipeline."

European stocks (.FTEU3) rose 0.2 percent, having hit a six-year peak, while Germany's DAX (.GDAXI) set a new record high. Asian stocks also rose a quarter percent.

The MSCI world equity index rose slightly on the day, dragged lower by declines in Tokyo and Shanghai shares.

Emerging stocks (.MSCIEF) rose a quarter percent, bringing year-to-date gains to 3.8 percent.

The euro fell nearly 0.2 percent to $1.3690, off last week's 2-1/2 year high. German 10-year Bund yields traded at 1.38 percent.

"Except for quantitative easing, which it likely won't resort to for a while, the ECB does not have a lot of easing options at its disposal to keep the euro down," said Masafumi Yamamoto, market strategist at Praevidentia Strategy in Tokyo.

"Therefore it will have to keep sending a steady message, saying it will ease a step at a time. The various ECB officials will also have to march in unison and convey the same message, especially with the dollar also showing signs of weakness."

U.S. crude oil and Brent crude futures both fell. The dollar rose 0.15 percent against a basket of six major currencies (.DXY).

(Additional reporting by Marius Zaharia; Editing by John Stonestreet)

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