GLOBAL MARKETS-Rally pauses ahead of ECB stimulus plan

* European rally pauses ahead of ECB meeting
* Dollar pulls out of recent dive
* Brent crude dips after topping $40 for first time since
March

By Marc Jones
LONDON, June 4 (Reuters) - The rapid rally in world markets
finally paused for breath on Thursday, as traders waited to hear
how much more stimulus the European Central Bank plans to shovel
out to address the coronavirus slump.
The ECB is expected to pump in another 250-500 billion euros
for the cause, but after weeks of sharp gains for stocks, oil
and confidence-sensitive currencies, investors were taking the
chance to lock in some profit.
Asian stocks stalled at a two-month high, London .FTSE ,
Frankfurt .GDAXI , Paris .FCHI and Brent LCOc1 dipped .EU
and the euro, pound and Aussie dollar all wilted as the U.S.
dollar =USD snapped out of week-long run of falls. /FRX
"As always, it's become an asymmetric risk with the ECB,"
said Gilles Moëc, chief economist of AXA Group, who was waiting
to see how much new bond buying stimulus the bank signals and
the length of time that it plans to do it.
"If they move (to provide immediate stimulus) it is partly
priced in. If they don't move it is going to be really bad," for
markets, he added.
The ECB delivers its policy decision at 1145 GMT and its
President, Christine Lagarde, holds a news conference at 1230
GMT.
Moëc expects the bank to raise "the quantum" of bond
purchases by 400 billion euros, from 750 billion to 1.1
trillion, though polls show forecasts range from 250 billion to
500 billion.
Safe-haven German 10-year bond yields were hovering at their
highest since mid-April at -0.35% DE10YT=RR , while their
Italian equivalents IT10YT=RR were at 1.57% compared to the 3%
hit at the height of the country's coronavirus woes in March.
The yield on the benchmark U.S. Treasury 10-year US10YT=RR
eased slightly after a 6 bps rise on Wednesday to 0.77%. It was
the largest one day rise in rates since May 18, and the highest
closing level since April 14.
The dollar rose around 0.3% =USD against a basket of
currencies, having weakened as markets have grown more
optimistic about the post-COVID 19 recovery and following
widespread protests in the U.S. over the death of a black man in
police custody.
The U.S. currency began strengthening in overnight trading
but picked up more sharply from around 0600 GMT. It pushed the
euro back below $1.12 and the Japanese yen to a two-month low of
109.150. JPY=EBS.
Riskier currencies fell too. The Australian dollar dropped
as much as 0.5% to $0.6884 AUD=D3 after retail sales there
suffered a historic plunge. Shares had gained though .AXJO
after the country's prime minister unveiled its fourth stimulus
package. Hong Kong's stock market .HSI was still hobbled by
concerns about Beijing's new national security law for the
former British colony and protests in the city's legislature
over a separate bill related to China's national anthem.
Chinese airline shares also drooped after U.S. President
Donald Trump's administration said on Wednesday it will bar
Chinese passenger carriers from flying to the United States from
June 16 in latest spat between the two countries. Oil prices, which have been on a tear in recent weeks, also
dipped as doubts about supply cuts by major producers began to
creep back in. O/R
U.S. crude CLc1 fell 2% to $36.53 a barrel. Brent crude
LCOc1 fell 1.4% to $39.23 per barrel, having touched highs
above $40 a barrel for the first time since early March.
Spot gold XAU= rose 0.25% to $1,701.28 an ounce early on
Thursday after losing 1.6% on Wednesday.

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