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GLOBAL MARKETS-Stocks hit near 3-year highs, euro gains on rate

Published 04/08/2011, 09:59 AM
Updated 04/08/2011, 10:04 AM
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* Global equities rise alongside commodities

* Euro at 15-month peak on EU rate hike optimism

* Dollar pressured as U.S. government shutdown looms

* Oil at 32-month high, gold notches another record high

(Updates to Wall Street open, adds details, quote, changes byline, previous LONDON)

By Leah Schnurr

NEW YORK, April 8 (Reuters) - World shares hit their highest level in almost three years on Friday, while heightened expectations of more interest rate hikes in the euro zone propelled the euro to a 15-month peak versus the dollar.

Gains in commodities such as oil and gold were driven by expectations of stronger demand and the threat of supply shortages, in some cases. Wall Street opened higher as shares of resource companies rose.

The greenback was also pressured as the prospect of a U.S. government shutdown loomed and U.S. 10-year Treasury yields rose near six-week highs.

Boosted by Thursday's European Central Bank rate hike, the euro rose to its highest since January 2010.

The euro was last up 0.8 percent at $1.4413 .

The ECB's move to raise its key interest rate to 1.25 percent has widened the euro zone's yield advantage over the United States, Britain and Japan, where interest rates remain at record lows. For details, see [ID:nLOOKCBANK]

ECP President Jean-Claude Trichet said policymakers were ready to tighten further if needed. But he stressed the ECB had not decided that Thursday's move was the first in a series of moves. [ID:nLDE7351QH]

"Trichet's press conference was neutral and suggests to us that the bank is embarking on a gradual series of rate increases of perhaps 25 basis points per quarter," said Jon Wetreich, currency strategist at Brown Brothers Harriman.

Stronger-than-expected German trade data helped underscore the health of the euro zone's largest economy, helping investors sidestep resurgent doubts over the resilience of the single currency zone following Portugal's request this week for aid to cope with its debt. [ID:nLDE73707D]

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ECB in graphics: http://r.reuters.com/kah88r

BOJ versus Fed assets: http://link.reuters.com/saq88r

Select interest rates: http://link.reuters.com/vug88r ^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^>

SHUTDOWN LOOMS

Brent crude rose past $125 per barrel to a 32-month high after attacks on Libyan oil fields and postponed elections in Nigeria. Commodities broadly rose on optimism the global economic recovery will fuel demand.

Spot gold hit another record high and silver climbed past the $40 an ounce level for the first time since 1980.

Mining shares led European stock gains and the FTSEurofirst 300 index <.FTEU3> rose 0.4 percent. The MSCI main world equity index <.MIWD00000PUS> rose 0.7 percent to its highest level since July 2008 and on track for its third consecutive weekly gain.

The Dow Jones industrial average <.DJI> gained 22.41 points, or 0.18 percent, to 12,431.90. The Standard & Poor's 500 Index <.SPX> rose 3.99 points, or 0.30 percent, to 1,337.50. The Nasdaq Composite Index <.IXIC> was up 8.48 points, or 0.30 percent, at 2,804.62.

In Washington, the White House and Congress worked furiously to break a U.S. budget deadlock and avoid a federal government shutdown, after President Barack Obama and congressional leaders failed to reach a deal in late-night talks. [ID:nN08144565]

"With all the focus recently on debt problems in the euro zone periphery, what is going on in the U.S. highlights that the U.S. has budget problems of its own, while the euro continues to be driven by the prospect of more rate hikes." (Additional reporting by Nick Olivari in New York and Sebastian Tong in London; Editing by Padraic Cassidy)

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