Euro, shares firm ahead of ECB meeting

Wed Jun 6, 2012 7:11am EDT
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By Richard Hubbard

LONDON (Reuters) - World shares and the euro gained on Wednesday as expectations grew that the acute financial problems in Spain and a deteriorating economic outlook would prompt Europe's central bank to respond with more stimulus measures.

While the European Central Bank (ECB) is not widely expected to cut rates when it meets later in the day, there is talk it could indicate a readiness to take some action as early as next month, given the escalating crisis in the euro zone.

Signs that the problems in Europe are hurting the global economy have also increased speculation that other major central banks may embark on a wave of policy easing moves, sparking a broad rally in gold, oil and riskier European government debt.

"The market's expectation regarding further policy action globally is picking up," said Ian Stannard, an executive director at Morgan Stanley.

The euro rose against both the dollar and the yen as investors closed bearish positions against the single currency in response to the rising hopes of central bank action.

The single currency hit a high of $1.2521, up 0.5 percent, before settling at around $1.25, well away from the two-year low of $1.2288 touched last Friday.

Recent disappointing economic data from the United States and China, as well as signs the euro area slowdown is affecting core countries such as Germany, have building up pressure on the world's central banks to make some response.

"We could well see easing taking place throughout of many of the G10 countries," said Morgan Stanley's Stannard.   Continued...

A trader reacts at his desk at Frankfurt's stock exchange June 4, 2012. REUTERS/Alex Domanski