Shares flirt with record highs on ECB easing bets

By Francesco Canepa

LONDON (Reuters) - Global shares flirted with an all-time peak on Thursday while the euro touched its weakest in more than two months on bets the European Central Bank would unveil new stimulus measures next week.

ECB policymakers have opened the door to a rate cut, effectively charging banks to hold cash at the central bank overnight, and to a refinancing operation aimed at supporting businesses when its board meets on June 5.

Expectations of monetary easing have caused the euro to fall 2.3 percent against the dollar since the last ECB policy meeting on May 8, leaving it trading at its lowest level since mid-February at around $1.3584.

The MSCI All-Country World index has gained 1.6 percent over the same period, pushing it to an all-time high on Wednesday. The index was flat at 0751 GMT.

"At least a rate cut is in the price (of the euro and stocks)," said Joost van Leenders, investment specialist for allocation and strategy at BNP-Paribas Investment Partners.

"I think markets expect a bit more, something directed at bank lending, such as purchases of asset-backed securities, and I don't think that is fully discounted."

Of 48 economists polled by Reuters this week 31 said the expected combination of a cut in the ECB's deposit rate below zero and new long-term cash for banks to lend on to small and medium-sized firms would help boost lending in the euro zone.

European shares held firm near multi-year highs, with the pan-European FTSEurofirst 300 index LONDON:FTEU3 hovering close to a near six-year peak reached earlier this week.

"The trend is up, the trend's your friend, but I wouldn't buy up at these levels," said Darren Courtney-Cook, head of trading at Central Markets Investment Management.

Japan's Nikkei share average TOKYO:N225 rose marginally, extending its gains into a sixth day as strong Asian equities supported sentiment, but trading was choppy as some investors started to book profits. [.T]

On the bond market, expectations of imminent ECB easing dented demand for low-yielding assets, keeping German yields at the lowest levels in a year and on course to record a fifth consecutive month of declines. [GVD/EUR]

Gold extended losses to a third straight session, hitting fresh 16-week lows on a stronger dollar and weak physical demand in top buyer China. [GOL/]

Brent futures edged up slightly, holding near $110 a barrel amid hopes of improved demand from top oil consumer the United States as a sharp drop in the country's gasoline stocks added to recent data pointing to a stronger economy. [O/R]

Elsewhere, London copper hovered near three-month high on dwindling global supply but iron ore fell to its lowest level since September 2012 on a deepening glut.

(Additional reporting by Sudip Kar-Gupta; Editing by Susan Fenton)