Equities gain, euro tumbles as ECB hints at faster debt purchases

NEW YORK (Reuters) - Equities around the world jumped on Tuesday and the euro tumbled on signals the European Central Bank may accelerate its 1 trillion euro bond-buying program over the next two months.

The dollar gained 1.6 percent against the euro and was broadly ahead for a second day, while U.S. Treasuries fell on government data showing that U.S. housing starts in April rose to a nearly 7-1/2 year peak.

Wall Street, which closed at record highs on Monday, reacted little to the upbeat housing data and was last down on weak results from retailer Wal-Mart. Some traders said the stronger-than-expected housing report could encourage Federal Reserve policymakers to raise interest rates sooner than later.

The Dow Jones industrial average <.DJI> fell 12.61 points, or 0.07 percent, to 18,286.27, the S&P 500 <.SPX> was down 1.7 points, or 0.08 percent, to 2,127.5 and the Nasdaq Composite <.IXIC> declined 5.70 points, or 0.11 percent, to 5,072.74.

European markets shot up after senior ECB policymaker Benoit Coeure talked of adjusting the bank's buying program.

He said that the speed of the recent spike in bond yields, which has effectively wiped out the benefits of quantitative easing, was worrisome and that the ECB could "moderately" increase its buying in May and June, and possibly in September, to ensure it doesn't fall behind on its target over summer.

That pushed the euro back below $1.12 for the first time in a week, and the FTSEurofirst 300 <.FTSE> jumped 1.4 percent as gains of 1.8 on Germany's DAX <.GDAXI> and in Paris <.FCHI> outpaced a 0.4 percent rise on London's FTSE <.FTSE>.

Bond yields, which move inversely to prices, also tumbled, with those on 10-year German Bunds down 7 basis points.

"There is a sense the comments from the ECB indicate a growing push back against the sell-off in bond markets that's been in place for the past month or so, and a push back against both euro strength and market volatility," said Manik Narain, a UBS strategist.

A small rise in core euro zone inflation, meanwhile, was offset by the UK where it turned negative for the first time since the 1960's. That knocked sterling as it fell for a third straight day against the broadly stronger dollar.

The dollar index <.DXY> was last up 1.20 percent, reflecting strong gains by the U.S. currency against the yen and Swiss franc. The euro last traded off 1.65 percent at $1.1127.

Treasuries were also hurt by large offerings of corporate bonds, with yields on the 10-year note last at 2.2673 percent on a price decline of 11/32.

China's surging stocks and a jump in the New Zealand dollar after a rise in inflation dominated Asian trading.

The CSI300 index <.CSI300>, already up over 30 percent this year, surged 3.4 percent and the Shanghai Composite Index <.SSEC> rose 3.0 percent, as investors welcomed Beijing's 2015 guidelines for economic reform.

Oil prices sagged for a second day as the stronger dollar took its toll alongside oversupply concerns triggered by a jump in Saudi Arabian exports. U.S. crude dropped $1.55 to $57.88 a barrel, while Brent fell 2.3 percent to $64.76. [O/R]

(Reporting By Michael Connor in New York; Editing by Meredith Mazzilli)

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