Shares higher on year-end buying, ECB stimulus hints

NEW YORK (Reuters) - Equity markets worldwide edged higher on Monday after rising expectations for more European stimulus supported shares in the region, while year-end buying underpinned U.S. stocks.

U.S. stocks inched up, but some profit-taking after the S&P 500's best weekly performance in nearly two months capped gains. Anticipation of outright government bond buying from the European Central Bank and greater political stability in Greece boosted European bourses.

"You?ve got the normal seasonality of the market supported by strong fundamentals," said Philip Orlando, chief equity market strategist at Federated in New York, on the gains in U.S. stocks.

Asian markets set the tone with gains of 1 percent following Wall Street's strong finish last week.

The dollar edged higher against a basket of major currencies, reversing an earlier dip in thin pre-holiday trading.

Trading volume is expected to be light this week due to the Christmas holiday, which could increase volatility. U.S. equity markets will open for an abbreviated session on Wednesday and close on Thursday for Christmas.

In the euro zone, Belgium's Luc Coene became the latest ECB policymaker to back outright government bond buying to stimulate the region's economy, while declines in oil prices ramped up expectations that the ECB could announce more stimulus measures to fight deflation.

"Even the Germans would have to wince and accept a certain degree of quantitative easing given the deflationary expectations associated with lower oil prices," said Clem Miller, portfolio manager at Wilmington Trust Investment Advisors in Wilmington, Delaware.

Expectations grew that Greece could avoid destabilizing snap elections after Prime Minister Antonis Samaras made a surprise offer to bring pro-European independents into the government if they backed his choice for a new president, boosting Greek shares.

MSCI's all-country world index <.MIWD00000PUS> was last up 0.33 percent at 419.57. Europe's broad FTSEurofirst 300 index <.FTEU3> closed up 0.44 percent, at 1,367.

The Dow Jones industrial average <.DJI> was last up 0.61 percent at 17,914.07, while the S&P 500 <.SPX> was up 0.21 percent at 2,075.06. The Nasdaq Composite <.IXIC> was last up 0.26 percent, to 4,777.67.

A plunge in shares of Gilead Sciences dragged on the S&P and Nasdaq 100 indexes, while the Dow was lifted by gains in large-cap tech shares.

Yields on benchmark 10-year U.S. Treasury notes were slightly down from Friday's levels at 2.16 percent after the government's sale of $27 billion new two-year notes, the first offer of $104 billion in new supply this week.

The U.S. dollar index, which measures the greenback against a basket of six major currencies, was last up 0.05 percent at 89.638.

Brent crude was last down $1.25, or 2.04 percent, at $60.13 a barrel. U.S. crude settled down $1.87, or 3.27 percent, at $55.26 per barrel.

Spot gold prices fell $12.44 to $1,182.91 an ounce on a dip in oil prices.

(Additional reporting by Marc Jones and Sudip Kar-Gupta in London and Chuck Mikolajczak in New York; Editing by Dan Grebler and Chizu Nomiyama)

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