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Stocks, euro gain on European bond-buying hopes

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Traders work at their screens in front of the German share price index DAX board at the stock exchange in Frankfurt

Traders work at their screens in front of the German share price index DAX board at the stock exchange in Frankfurt January 19, 2015. REUTERS/Stringer

By Michael Connor

NEW YORK (Reuters) - European and U.S. equities rose on Wednesday, lifted by reports the European Central Bank will announce a 50 billion euros per month bond-buying program to boost the euro zone's flagging economy.

U.S. Treasury prices fell while the euro rose against the dollar. A source told Reuters the ECB's Executive Board has proposed a program that would enable the bank to buy 50 billion euros ($58 billion) in bonds a month from March.

The FTSEurofirst 300 index, which tracks European stock markets, turned positive on the news and closed up for a fifth day with a 0.6 percent rise. London's FTSE 100 ended 1.6 percent higher. ECB head Mario Draghi will speak to the media at 8:30 a.m. EST (1330 GMT) on Thursday.

"The ECB rumour was very important. The market's perception was that Draghi was going to disappoint tomorrow in the magnitude" of the program, said Phil Orlando, chief equity market strategist at Federated Investors in New York.

The euro hit a nearly one-week high against the dollar, at $1.168, and was last at $1.1580, according to Thomson Reuters data.

The expectations of ECB action, with the potential stimulus seen at around 600 billion euros ($690 billion), according to a Reuters poll, kept core euro zone bond yields near record lows.

U.S. stocks posted smaller gains, capped in part by a 3.1 percent slump in International Business Machines shares after the company issued a disappointing outlook. IBM, down $4.86 at $152.09, was among the biggest decliners on the S&P.

The Dow Jones industrial average rose 39.05 points, or 0.22 percent, to 17,554.28, the S&P 500 ended up 9.57 points, or 0.47 percent, to 2,032.12 and the Nasdaq Composite added 12.58 points, or 0.27 percent, to 4,667.42.

The MSCI World Index of equities markets was up 0.5 percent.

U.S. Treasury yields ended higher as investors unwound bullish positions on the ECB bond-buying reports and a surprise interest rate cut by the Bank of Canada.

After nearing record lows touched last week, yields on U.S. 30-year bonds were 2.4427 percent, reflecting a price drop of 31/32.

The Japanese yen rose more 1 percent against the U.S. dollar after the Bank of Japan left policy unchanged. Though the decision by the BoJ not to expand its stimulus package had been widely expected, some had bet on a surprise move as inflation targets looked elusive. The yen later reclaimed some losses and last stood at 118 yen to the dollar.

The Canadian dollar plunged more than 2 percent against the U.S. dollar to its weakest since April 2009, after the Bank of Canada shocked financial markets with its interest-rate cut.

Oil prices rose 2 percent, with Brent crude at $48.94 a barrel, following a recent heavy sell-off that led Total's chief executive to say the French energy major plans to cut capital spending by 10 percent this year.

(Reporting by Michael Connor in New York; Editing by Leslie Adler and James Dalgleish)