GLOBAL MARKETS-Euro falls on potential ECB rate cut; stocks slip

Reuters

* Global equity markets fall although factory activity gains

* Euro under pressure after biggest fall vs dollar in 6 mths

* Oil declines on strong dollar

* Bond prices fall on rosy surveys of factory activity

By Herbert Lash

NEW YORK, Nov 1 (Reuters) - Global equity markets slipped on

Friday despite upbeat factory data worldwide, while the euro

fell to a two-week low against the dollar on growing

expectations the European Central Bank will ease monetary policy

further to encourage growth.

Stocks on Wall Street see-sawed after data showing U.S.

manufacturing expanded briskly in October raised some worries

that the U.S. Federal Reserve may scale back its massive

stimulus much sooner than expected.

U.S. equities have been pressured since a Fed statement on

Wednesday raised concerns about when the central bank would

begin to scale back its stimulus program, which has fueled the

benchmark S&P 500 index's 23-percent rally this year.

The Institute for Supply Management (ISM) said its index of

U.S. factory activity rose to 56.4 last month - its best showing

since April 2011 - from 56.2 in September. Economists polled by

Reuters had expected a reading of 55.

The S&P and Dow Jones industrial average have repeatedly hit

record highs this year, including earlier in the week, but the

strong gains have triggered some concerns about how much further

the rally can continue.

With almost three-fourths of S&P 500 companies reporting

results so far, 68.5 percent have beaten profit expectations,

above the long-term average of 63 percent, according to Thomson

Reuters data. However, only 53.3 percent have topped revenue

forecasts, below the 61 percent average since 2002.

"I'm not comfortable with the market at all-time highs,

especially with earnings being mediocre," said Mark Grant,

managing director at Southwest Securities in Fort Lauderdale,

Florida.

"But the manufacturing report was better than expected, and

where else can you go with the Fed putting so much liquidity

into the system?" Grant said.

The Dow Jones industrial average was up 54.71 points,

or 0.35 percent, at 15,600.46. The Standard & Poor's 500 Index

was up 2.32 points, or 0.13 percent, at 1,758.86. The

Nasdaq Composite Index was down 6.04 points, or 0.15

percent, at 3,913.67.

European stock markets eased off five-year highs amid signs

of weakness in regional corporate earnings.

The pan-European FTSEurofirst 300 index of leading

European companies fell 0.31 percent to close at 1,289.52.

U.S. Treasuries prices fell for a third consecutive session

as the encouraging ISM report on manufacturing suggested the

U.S. economy overcame a drag from the partial government

shutdown in October.

The rosier data revived some worries among investors that

the Fed might scale back its bond-buying earlier than expected -

at its December meeting - rather than early in 2014.

"There is a feeling that they might taper in December. It

has gained a little steam, but that's not the consensus," said

Matt Duch, a portfolio manager at Calvert Investments in

Bethesda, Maryland.

The benchmark 10-year U.S. Treasury note was

down 21/32 in price to yield 2.6181 percent.

Euro zone bonds broadly edged higher, extending this week's

rise, after data showed a surprisingly sharp inflation slowdown

in the euro zone. Many in the market expect the ECB to signal a

rate cut or new liquidity injections at its meeting next week.

German two-year yields, the most sensitive to

shifts in monetary policy expectations, were 1 basis point lower

at 0.11 percent.

Bund futures fell 15 ticks to settle at 141.85,

having hit a two-month peak of 142.32 on Thursday.

Expectations for an ECB rate cut were seen eroding the

euro's interest rate advantage over other major currencies. The

single currency was poised to notch its worst weekly loss

against the dollar since July 2012.

The euro fell 0.66 percent to $1.3492.

Renewed pressure on the euro saw the dollar index rise to a

six-week high of 80.785, climbing further from a

nine-month trough of 78.998 plumbed a week earlier. It last

traded at 80.719.

The dollar was up 0.39 percent against the yen at 98.74

yen, according to Reuters data.

Oil prices fell broadly, heading for a large weekly

percentage decline, as a strong dollar and ample supplies

outweighed concerns about a drop in Libyan crude exports.

Brent crude for December delivery fell $2.93 to

settle down at $105.91 after rising as high as $109.41 a barrel

in early trading.

U.S. oil for December delivery settled down $1.77 at

$94.61, putting it in line for a fourth straight week of

declines, its longest losing streak since June 2012.

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