Global shares extend rally, euro firm before ECB meets

By Marc Jones

LONDON (Reuters) - World share markets extended their rally on Wednesday as investors focused on the good news in a mixed bag of global economic data. The safe-haven yen fell to a 10-week low.

Trading was still cautious before Thursday's meeting of the European Central Bank and Friday's U.S. jobs numbers. Either could move markets significantly.

Europe's main stocks markets climbed to near a one-month high, heading towards a seventh straight day of gains for the first time in six months. Greek and Portuguese bonds reached post-euro-crisis highs.

Investors have been speculating the European Central Bank will soon loosen policy, though official messages are mixed.

On Tuesday, ECB Vice President Vitor Constancio told a news conference that low inflation was a concern but denied deflation was a threat. That was taken to mean the chances the central bank would move on Thursday were low.

The euro got a modest lift and was around $1.3810 at 0800 GMT. That was a shade higher than it had been at the last ECB meeting, a fact that won't have gone unnoticed at the bank, which has cited the euro as one reason it might cut rates again.

"All the money that ran away at the height of the crisis is now coming back in, and that flow, as well as driving this periphery rally, is keeping the euro high," said Aberdeen Asset Management fixed income and FX strategist Luke Bartholomew. "We are short the euro, long the periphery, but it's incredibly frustrating being short the euro at the moment."

CHINA PROPERTY

Financial markets now appear to have recovered after stumbling earlier this year. A cutback in U.S. monetary stimulus, the geopolitical tug-of-war over Ukraine and signs the Chinese economy was slowing all weighed on markets.

Even sluggishness in China is now considered favourable, because it bolsters the case for stimulus. There are signs Beijing is hastening infrastructure spending in response.

Chinese state media reported that several cities may relax restrictions on house ownership, causing property stocks to surge. The CSI300 property sub index rose 4 percent.

"Previously, the government repeatedly talked about controlling the property market, but now they aren't saying anything about this and instead there have been signs of easing policies," said Tian Weidong, head of research in Kaiyuan Securities in Xi'an.

MSCI's broadest index of Asia-Pacific shares outside Japan crept up 0.4 percent to a fresh four-month high, while South Korea made a three-month peak.

The Nikkei outperformed after the yen weakened. It climbed 1.7 percent after Wall Street hit an intraday record high on Monday.

U.S. economic news has whetted risk appetite. Manufacturing ISM data showed an expansion after weather-induced weakness in February. New-vehicle sales saw a surprisingly brisk rise. The U.S. payrolls report on Friday is expected to show employment rose to 200,000 in March.

The brighter tone put pressure the long-end of the U.S. Treasury curve, where yields on 10-year paper rose 2 basis points to the highest in a week at 2.77 percent.

Shorter-dated debt fared better after Federal Reserve Chair Janet Yellen's comment this week that extraordinary stimulus would be needed for some time to come.

WILL THEY, WON'T THEY?

A Reuters poll of 22 euro money-market traders found 18 expected no change in the ECB's 0.25 percent refinancing rate this week.

The single currency rose to $1.3810 for its fourth straight session of gains. It also gained as the yen softened, reaching 143.30. The dollar reached a 10-week top at 103.86 yen.

Among commodities, Brent crude was flat at $105.54 a barrel. It had shed over 2 percent overnight after Libyan rebels blocking oil ports hinted at a deal with Tripoli, which could increase supply.

U.S. crude eased 6 cents to $99.68 a barrel. It also lost around 2 percent on Tuesday, amid expectations domestic inventories would grow.

Spot gold was sulking at $1,283.10 an ounce. It touched a seven-week low of $1,277.29 on Tuesday.

(Additional reporting by Wayne Cole in Sydney; Editing by Larry King)