* Central banks expected to extend easy policies
* European shares 1.25 pct higher, banks lead
* Gold snaps four day losing streak
* Oil, copper gain as China pledges to maintain growth
By Richard Hubbard
London, March 5 (Reuters) - European shares jumped, oil rose
and gold snapped a four-day losing streak on Tuesday as
investors bet major central banks would keep monetary policy
easy at meetings this week.
Shares on Wall Street may even set a new record as stock
futures pointed to a strong start with the benchmark Dow index
just 40 points short of its all time closing high.
Despite signs of patchy growth in the world economy, demand
for riskier assets has been fuelled by unprecedented levels of
liquidity injections by the world's major central banks, and
investors are seizing on any signs this will continue.
"Central banks are protecting the downside for now but the
question is for how long," said Lex van Dam, hedge fund manager
at Hampstead Capital.
Comments from U.S. Federal Reserve's vice chair Janet Yellen
on Monday backing the current aggressive stimulus effort, and a
decision by Australia's Reserve Bank to keep interest rates at
record lows were the latest signs policies will remain in place.
The Bank of Japan, the Bank of England and the European
Central bank are all expected to either keep current loose
policies in place or add extra stimulus after their policy
meetings this week.
Investors have also taken heart from signs that the
inconclusive Italian election result, weaker data from China and
Europe, and the dramatic government spending cuts in Washington
have not sparked any major sell off.
"Despite spending cuts in the U.S., a lack of any kind of
political resolution in Italy and weaker data in Asia, we just
can't get a proper 'risk-off' mood going ... as mad money
(quantitative easing and zero interest rate policy) trumps every
other concern," said Kit Juckes, strategist at Societe Generale
in a note to clients.
European shares bolted higher from the start of trading on
Tuesday with the broad FTSEurofirst 300 index rising by
1.2 percent at midday to be around 1,182.75 points, a fresh
London's FTSE 100 gained 0.7 percent, close to a
five year high, while and Frankfurt's DAX gained over
1.6 percent putting it on track for its second best day of 2013.
Investors in Europe also got some good news on the economic
front when a gauge of euro zone business activity for February
showed a better-than-expected result though the purchasing
managers' index (PMI) still pointed to a region-wide recession.
The data also provided further evidence of growing economic
disparities within the 17-nation currency bloc.
"The outlook ... seems to largely depend on whether Germany
can continue to expand and offset the weakness in France, Italy
and Spain," said Chris Williamson, chief economist at survey
The euro initially climbed on the PMI data but shed the
gains to be up just 0.1 percent at $1.3035 as the focus
switched back to prospects the ECB will cut interest rates at
its policy meeting on Thursday.
"The (PMI) data did not have a lasting effect on the euro,
because what counts in the end is what the ECB makes of these
numbers as it determines their growth outlook and how likely a
rate cut will be," said Ulrich Leuchtmann, head of FX research
The dollar fell 0.1 percent against a broad range of major
currencies following the comment's from the Federal Reserve's
influential vice chair Janet Yellen who is widely tipped to
succeed current Fed chairman Ben Bernanke.
The weaker dollar and prospects of more money printing by
central banks gave broad support to the commodity markets which
were also helped by a promise from China's government to deliver
economic growth of 7.5 percent this year.
Gold rose nearly half a percent to $1,581.84 an ounce
after four straight sessions of falls.
Three-month copper on the London Metal Exchange rose
to $7,774.25 a tonne.
Copper demand from China, which accounts for 40 percent of
global consumption, slowed last month ahead of the week-long
Lunar New Year holiday, but expectations of a rebound have
gathered pace ahead of the seasonally stronger second quarter.
Brent crude oil rose towards $111 per barrel, ending a
five-day losing streak while U.S. crude added 31 cents to