GLOBAL MARKETS-Shares flat but S&P hits new high; bonds rally on ECB hopes

Reuters - UK Focus

* Risk appetite up, S&P 500 expected to extend record highs

* Gold steadies at 3-1/2-month low as safe-haven appeal dims

* Euro at three-month low as lending data back case for rate

cuts

(Adds oil settlement prices)

By Herbert Lash

NEW YORK (Frankfurt: HX6.F - news) , May 28 (Reuters) - Global equity markets traded

flat on Wednesday as U.S. and German equities eased from record

highs but risk appetite remained strong, knocking safe-haven

gold to a 3-1/2-month low.

U.S. and European bond markets rallied, pushing yields to

multi-month lows. Receding fears that big wins by anti-euro

parties in EU elections might derail fiscal reforms in weaker

countries helped European bonds.

The recent rally in equities has been supported by strong

U.S. economic data and expectations of monetary easing by the

European Central Bank. The benchmark S&P 500 hit yet another

intraday record early in the session before retreating.

Spot gold fell 0.4 percent to $1,258.00 an ounce,

having hit $1,255.66, marked its weakest since early February.

On Tuesday, gold posted its biggest daily fall since

mid-December after U.S. and German stocks set record highs.

The 10-year U.S. Treasury note fell 20/32 in

price to yield 2.4449 percent, the lowest since last July.

"We made a pretty decisive move above 1,900" on the S&P 500,

said Jim Paulsen, chief investment officer at Wells Capital

Management in Minneapolis.

"Economic momentum is clearly to the upside ..., the

surprise index is up and that's pretty powerful for stocks," he

said, referring to Citi's Economic Surprise Index, which

measures how well data performs relative to forecasts. "We've

had a constant stream of better-than-expected data and the bond

market has remained supportive."

MSCI (NYSE: MSCI - news) 's all-country world equity index turned

slightly higher, rising 0.08 percent to 420.42, less than 2

percent below its lifetime high.

The FTSEurofirst 300 index of leading European

shares fell 0.07 percent to close at 1,377.83.

Wall Street traded mixed as the S&P rebounded a tad.

The Dow Jones industrial average fell 4.53 points, or

0.03 percent, to 16,670.97. The S&P 500 gained 2 points,

or 0.1 percent, to 1,913.91 and the Nasdaq Composite

dropped 2.881 points, or 0.07 percent, to 4,234.188.

The dollar rose on softness among other major currencies

such as the euro, which fell below $1.36 on gathering

expectations of an ECB policy shift next week.

The U.S. dollar index hit an eight-week peak of

80.581, reflecting a 0.29 percent decline for the trading day in

the euro against the U.S. currency. The index, a measure

of a basket of currencies, was last at 80.561, up 0.26 percent.

A rally in German Bunds spilled over to U.S. Treasuries.

German 10-year Bund yields, the benchmark for euro

zone borrowing, were down at 1.287 percent, a 2014 low.

Yields fell after an unexpected rise in German unemployment

and a deceleration in the euro zone money supply reinforced

expectations of further ECB stimulus at next month's meeting.

U.S. crude fell more than $1 a barrel as traders took profit

ahead of inventory reports expected to show a build, while Brent

edged lower, propped up by tensions in Ukraine and Libya.

Brent settled down 21 cents at $109.81 a barrel,

while U.S. oil fell $1.39 to settle at $102.72 a barrel.

(Reporting by Herbert Lash; Additional reporting by Marc Jones

in London; Editing by Leslie Adler and James Dalgleish)

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