GLOBAL MARKETS-Trump's "big" spending hopes prop up stocks

By Reuters / February 28, 2017 / in.investing.com / Article Link

* Graphic: FX rates in 2017 http://tmsnrt.rs/2egbfVh

* Europe stocks flat, world shares set for 4th month of gains

* Trump flags big infrastructure spend before Tuesday speech

* Oil futures firm, gold retreats from 3-1/2-month high

By Marc Jones

LONDON, Feb 28 (Reuters) - World stocks hovered just off all-time highs and were on course for a fourth straight month of gains on Tuesday, as investors awaited a speech by U.S. President Donald Trump for signals on infrastructure spending and tax cuts.

Global share markets .MIWD00000PUS have gained more than 10 percent since Trump won power in November and investors are hoping his speech to the U.S. Congress will detail his big spending promises to voters. Street ESc1 was expected to hold at a record high when it reopens, while some upbeat company earnings helped Europe steady as it looked to pull out of a three-day dip and consolidate a 2.5 percent .FTEU3 gain for the month. .EU

In the currency markets, the dollar .DXY , which has not taken to the Trump trade quite so enthusiastically, was treading water against most of its major peers, with the only notable move a dip against the yen to 112.41 JPY= . FRX/

Gold XAU= was also steady, having hit a 3-1/2 month high on Monday and 10-year U.S. Treasury yields US10YT=RR hovered at about 2.36 pct, some 10 basis points down on where they started the year.

That suggests that bond investors at least are not fully convinced about the chances of a substantial pick-up in U.S. growth and higher interest rates.

"While markets no doubt appear to like what they are hearing, the president now needs to deliver. He's talked the talk and he now needs to walk the walk," CMC (NS:CMC) markets chief strategist Michael Hewson said.

Trump met U.S. state governors at the White House on Monday and said he sees "big" infrastructure spending and that he is seeking a "historic" increase in military spending of more than 9 percent.

That means some $54 billion of military spending is now on the table, though that appears to be funded by cuts elsewhere in government, which Trump wants to make leaner. by engineering, construction and defence firms, Wall Street stocks eked out another all-time high, with the Dow Jones recording its 12th straight record, a winning streak not seen since 1987, and fed a 5 percent rise for the month. .DJI

It looked set to struggle to keep the run going later, .N though there is plenty of data likely to stir interest, including PCE inflation, which the Federal Reserve likes to look at, as well as updated fourth quarter GDP. ECONG7

David Kelly, Chief Global Strategist, JP Morgan Asset Management said Trump's speech later was unlikely to be highly detailed in terms of policy proposals.

"However, it will be important to see how optimistic the administration is about the economic outlook and how willing it is to boost the deficit in an attempt to fulfil the president's campaign promises."

TIME TO TRIM

In Europe, the economic signals were largely encouraging, although not universally so.

Sweden's crown rose EURSEK= as its economy showed solid 2.3 percent year-on-year growth and inflation figures were stronger across central Europe, but British consumer morale suffered a knock which sent the pound down. GBP= flagship poll of large global investors showed a trimming of equities exposure this month, with many arguing that markets had become too complacent about Trump's policies and the risks stemming from Europe's election calendar. programmes from the world's big central banks are also still having an impact.

Germany, which is benefitting from the European Central Bank's stimulus, sold two-year Schatz bonds at almost minus 1 percent, another record low interest rate that showed investors are still prepared to pay plenty for the privilege of holding German government debt. GVD/EUR

The euro barely budged on the day at $1.0595 EUR= , with February set to be its fourth monthly fall in the last five. /FRX France's bond yields continued to ease, however, as the recent jitters about its upcoming election stabilised. FR10YT=TWEB

In commodity markets, oil edged higher to just over $56 a barrel, underpinned by high compliance with OPEC's agreed production cuts. O/R

The organisation has so far surprised the market with its discipline, which could increase further in coming months as the biggest laggards - the United Arab Emirates and Iraq - pledge to catch up quickly with their targets.

"With the prospect of OPEC extending the current cuts even longer, we would expect to see prices continue to push higher from here," ANZ analysts said in a note.

Industrial metals such as copper CMCU3 and nickel CMNI3 were both a touch lower. The latter has surged almost 17 percent this month while copper is up almost 30 percent since late October.

A strike at the Escondida copper mine in Chile, the world's largest, appeared far from ending as the conflict neared its third week, with the union denying a news report that it had returned to talks with mine owner BHP Billiton (LON:BLT). Reuters Live Markets blog on European and UK stock markets see reuters://realtime/verb=Open/url=http://emea1.apps.cp.extranet.thomsonreuters.biz/cms/?pageId=livemarkets

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