Stocks, euro gain on European bond-buying hopes

NEW YORK (Reuters) - European and U.S. equities rose on Wednesday, lifted by news reports that the European Central Bank will announce a massive bond-buying program to boost the euro zone's flagging economy.

U.S. Treasury prices declined and the euro rose against the dollar after news reports that the ECB, which will hold a policy meeting on Thursday, plans to buy 50 billion euros ($58 billion) in bonds per month for at least one year.

The FTSEurofirst 300 index <.FTEU3>, which tracks European stock markets, turned positive on the news and closed up for a fifth day with a 0.6 percent rise. London's FTSE 100 <.FTSE> ended 1.6 percent higher.

U.S. stocks struggled to maintain gains. International Business Machines Corp shares slumped 3 percent after the company issued a disappointing outlook.

The Dow Jones industrial average <.DJI> was up 10.65 points, or 0.06 percent, to 17,525.88, the S&P 500 <.SPX> was up 5.52 points, or 0.27 percent, to 2,028.07, and the Nasdaq Composite <.IXIC> added 8.34 points, or 0.18 percent, to 4,663.19.

IBM, down $4.87 at $152.08, was among the biggest decliners on the S&P. The MSCI World Index <.MIWO00000PUS> of equities markets was up 0.55 percent.

U.S. Treasury debt prices, especially those of long-term issues, rose as the European bond-buying program was seen fuelling demand for Treasuries that already pay much higher yields but later reversed.

After nearing record lows touched last week, yields on 30-year bonds were 2.4427 percent, reflecting a price drop of 31/32.

The euro hit a nearly one-week high against the dollar, at $1.168, after the media reports and was last at $1.1564, according to Thomson Reuters data.

"The euro's reacting to news that the program is significantly not as large as what was priced in," said Richard Franulovich, senior currency strategist at Westpac in New York.

The expectations of ECB action - with the potential stimulus seen at around 600 billion euros ($690 billion), according to a Reuters poll - kept euro zone core bond yields near record lows.

The Japanese yen rose more 1 percent against the U.S. dollar after the Bank of Japan left policy unchanged. Though the decision by the BoJ not to expand its stimulus package had been widely expected, some had bet on a surprise move as inflation targets looked elusive.

The yen later reclaimed some losses and last stood at 118 yen to the dollar.

Bets on euro zone monetary stimulus also touched commodities markets, with gold climbing above $1,300 an ounce for the first time since August before settling back to $1,293. The prospect of looming deflation and increased market volatility were cited as factors supporting demand for bullion.

Oil prices edged up 1.25 percent, with Brent crude at $48.56 a barrel, following a recent heavy sell-off that led Total's chief executive to say the French energy major plans to cut capital spending by 10 percent this year.

(Reporting by Michael Connor in New York; Editing by Leslie Adler)

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