GLOBAL MARKETS-Stocks rally, euro steadies ahead of ECB meeting

* Cyclical sectors outperform; focus on ECB meeting

* Big question is whether ECB will buy more euro zone bonds

* No action from the ECB likely to punish the euro, risky
assets

* Goldman says go long Japan’s Nikkei in 2011

(Updates with European opening)

By Kevin Plumberg

HONG KONG, Dec 2 (BestGrowthStock) – Japan’s Nikkei share average
hit a five-month high and the euro stayed within sight of
overnight highs on Thursday ahead of a European Central Bank
meeting that investors speculate could bring new steps to
contain the euro zone’s fiscal crisis.

Major European stock markets also rose, with the
FTSEurofirst 300 opening up 0.4 percent and London’s
FTSE 100 rising 0.6 percent . U.S. stock index futures
(SPc1: ) edged up 0.1 percent.

Gains in Europe and Asia followed Wall Street’s 2 percent
rally on Wednesday led by companies most sensitive to economic
turning points and a U.S. Treasuries sell-off after reports
showed strength in labour and industrial sectors.

Markets remained nervous, however, as even after Ireland’s
85 billion euro bailout investors have been losing confidence
that Portugal and Spain and perhaps others could escape a
similar fate. That led to expectations the ECB will announce
backstop measures to keep cash flowing in its financial
system, though it may disappoint investors by not being ready
to increase bond purchases just yet.
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“The sovereign debt crisis has shown early signs of
transforming into a banking and liquidity crisis,” Todd Elmer,
currency strategist with Citi in Singapore, said in a note.

“A breakdown in market function is likely to drive risk
reduction among investors, which should favor sharp dollar
strengthening vs euro.

“Such price action could eventually force a stronger
response from both fiscal and monetary authorities in Europe,
but expectations for imminent action are probably premature.”