GLOBAL MARKETS-Euro regains footing as data pick-up tempers ECB rate cut bets

Reuters

* Euro regains footing, but ECB under pressure to boost

stimulus

* European shares inch higher to new 5-year highs

* Markets can't shake Fed speculation as U.S. data improves

* Gold steadies after longest losing streak in nearly 6

months

By Marc Jones

LONDON, Nov 6 (Reuters) - The euro rose off a seven-week low

on Wednesday as talk of the U.S. Federal Reserve extending the

lifespan of its stimulus programme and some robust data offset

expectations of more European Central Bank easing in coming

months.

With uncertainty high over what steps the ECB might hint at

after its meeting on Thursday, investors focused on fresh euro

zone data as solid services PMIs and a surge in German factory

orders offset some weaker retail figures.

The services report pointed to a continued gradual recovery

in the 17-country euro zone but one that remains painfully slow

in many parts of the bloc.

European shares had already inched to a new five-year high

by the time the data came out. A batch of better-than-expected

results provided the leg up, including from world No. 1 jobs

agency Adecco, which flagged increasing demand in

Europe.

The euro held onto gains at $1.3520, having jumped

after the German data and risen steadily from $1.3469 overnight,

although expectations of a dovish turn by the ECB kept a lid on

the shared currency.

"For the next couple of days we have such a heavy events

schedule, with the ECB tomorrow and then U.S. payrolls on

Friday, that I think we are looking at the market battening down

the hatches," said Ned Rumpeltin, head of G10 FX strategy at

Standard Chartered.

The dollar, meanwhile, pared its recent gains against a

basket of major currencies and dipped 0.3 percent, even

while it edged up on the Japanese yen to 98.60.

Comments from Fed policymaker John Williams, who said the

central bank should wait for stronger evidence of growth

momentum before trimming bond-buying, helped balance out a

surprisingly strong U.S. service sector report.

BONDS NUDGE UP

A pair of research papers by top Fed officials suggesting

the central bank has the scope for even more economic stimulus

and for more relaxed thresholds on when to raise rates also

created a stir.

Jan Hatzius, chief economist at Goldman Sachs, felt the

papers were important enough to alter his outlook for policy.

"The studies suggest that some of the most senior Fed

staffers see strong arguments for a significantly greater amount

of monetary stimulus," he wrote in a note to clients.

"Our central case is now that the FOMC will reduce the

threshold from 6.5 percent to 6 percent at the March Open Market

Committee meeting."

That helped Treasury prices and trimmed yields on 10-year

notes by 15 basis points to 2.6476 percent, while

German Bunds matched the moves in Europe.

Futures prices also pointed to Wall Street

making back the small losses Tuesday's stronger-than-expected

data had caused as investors began thinking again about the Fed

trimming its huge stimulus programme.

Asian markets had for the most part moved sideways in face

of the uncertainty over U.S. and European monetary policy,

though Japanese stocks managed to buck the trend thanks

to gains in major car makers.

Excitement was otherwise sorely lacking, with MSCI's index

of Asia-Pacific shares outside Japan barely

moved. Australia's main index was all but flat, while

shares in Shanghai dipped.

A FLYING KIWI

While evidence of economic resilience from Tuesday's upbeat

services data was welcome, it also adds to the case for the Fed

to wind back its bond buying programme. Most analysts still

favour March as the window for a move, but a shift in December

is a growing risk.

New Zealand also added to the run of better global economic

news as employment jumped well more than forecasts. It prompted

investors to bring forward rate hike expectations. The country's

dollar climbed a third of a U.S. cent to $0.8400.

In commodity markets, gold was a few dollars firmer

at $1,317.79 and trying to stabilise after seven straight

sessions of losses. Copper rose 0.4 percent.

Oil prices recouped just a little of their recent losses,

which had seen U.S. crude end at a five-month trough on Tuesday.

Growing U.S. supplies have continued to pressure oil prices,

with U.S. crude ending on Tuesday at a five-month low.

Brent crude regained 80 cents to $106.16 a barrel,

while NYMEX crude futures bounced 82 cents to $94.18.

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