GLOBAL MARKETS-ECB stimulus hopes keep Europe stocks at 3-month high

* European stocks near 3-mnth high, euro near 7-1/2 mnth low
* Eurozone inflation bolsters ECB easing bets
* Oil slips for fifth day ahead of Friday OPEC meeting
* Fed's Lockhart says "compelling" case to raise U.S. rates

By Marc Jones
LONDON, Dec 2 (Reuters) - European stocks hovered at a
3-month high and the euro was just above a 7-1/2-month low on
Wednesday as euro zone inflation remained barely visible and
underlined just why the ECB is set for more stimulus.
However, Wall Street was expected to see a subdued start and
the dollar was still recovering from an overnight wobble, though
European investors were still mostly focused on Thursday's
expected moves from European Central Bank chief Mario Draghi.
The euro dropped back below $1.06 as the first reading of
November euro zone inflation stayed at 0.1 percent, far below
the ECB's near 2 percent target and reiterating the worries that
it could stifle any serious economic growth.
Markets are expecting another salvo of easing measures from
Draghi on Thursday, including an expansion of its bond buying
programme and even higher charges for commercial banks that
hoard excess cash.
"It (euro zone flash HICP data) is not consistent with the
trend that the ECB was expecting," said Ruben Segura-Cayuela, a
euro zone economist at Bank of America Merrill Lynch (N:BAC).
"We are expecting a one-year extension on QE purchases and
quantities to go up to as much as 70 billion euros a month. We
also see a cut in the deposit rate, we think 10 basis points,
but it could be 20."
The hopes for an early Draghi Christmas present had
initially lifted Germany's DAX .GDAXI , France's CAC 40 .FCHI
and Spain's IBEX .IBEX but all three had run out of steam as
the start of U.S. trading approached.
The pan-European FTSEurofirst .FTEU3 , however, stayed
flush against a 3-month high hit the previous day as London's
FTSE .FTSE kept it steady with a 0.4 percent gain .EU
It came as weak construction data left the pound GBP= near
a 7-month low and as British politicians were preparing to vote
on whether to join allied bombing of Islamic State targets in
Syria. GB10YT=RR
With the euro back on the slide again, the U.S. dollar index
.DXY pushed back above the 100 threshold and toward the
12-year high it had hit in March.
Federal Reserve head Janet Yellen speaks in Washington later
and focus will be on what she has to say, with the Fed widely
expected to pull the trigger on its first hike in U.S. interest
rates in almost a decade on Dec. 16. ID:nL1N13Q1V0
The economic data has not been playing ball with the Fed's
policy plans in recent weeks. With a huge consensus now assuming
a hike, the sharp downturn in the manufacturing surveys have
come alongside weaker retail sales and Chicago PMIs. ECONALLUS
"It would be historic if she (Yellen) were to raise rates
into a slowdown." said Didier St George, managing director at
fund manager Carmignac. "It would be a concern."

OIL PRESSURE
There was a more positive signal, however, from data showing
U.S. private employers had added 217,000 jobs in November, the
biggest increase since June.
Four other Fed members aside from Yellen were also due to
speak on Wednesday, with Atlanta Fed President Dennis Lockhart
first out the block saying there was a "compelling" case to
raise U.S. rates. ID:nN9N12202G
Wall Street futures pointed to the main S&P 500 ESc1 , Dow
Jones Industrial 1YMc1 and Nasdaq NQc1 markets starting flat
to slightly lower.
The euro zone's limp inflation data meant downward pressure
was firmly back on euro zone government bond yields with 10-year
German yields down 4 basis points to 0.44 percent DE10YT=TWEB .
Two-year yields stayed just off a -0.43 percent low hit
Tuesday, while going in the other direction, U.S. 2-year yields
at 0.93 were eyeing a return to their recent 5-1/2 year highs.

"The poor ISM data (on Tuesday) is unlikely to derail any
rate hike plans as U.S. domestic demand is firm and wages show
inflationary signs," wrote Makoto Noji, a senior rates
strategist at SMBC Nikko Securities in Tokyo.
MSCI's broadest index of Asia-Pacific shares outside Japan
.MIAPJ0000PUS fell for a fifth straight day overnight as a 1
percent fall in Thai stocks .SETI and host of other bourses
offset a 3.6 percent rebound in Shanghai .CSI300 .
Japan's Nikkei .N225 also ended in the red but it had
barely budged from a 3-1/2 month high and Australian stocks
.AXJO recovered from early losses after robust domestic GDP
data showed the economy growing at a brisk 0.9 percent.
The Australian dollar, already on a bullish footing after
the Reserve Bank of Australia (RBA) skipped a chance on Tuesday
to cut interest rates or talk down the currency afresh, touched
a 7-week high of $0.7345 AUD=D4 .
In commodities, crude oil prices sagged for a fifth straight
session on expectations that OPEC will not cut output when they
meet later this week, despite the market's supply glut. O/R
U.S. crude CLc1 was down 0.7 percent at $41.40 a barrel
and Brent LCOc1 lost 1 percent to $43.98 a barrel.
Copper, attuned to global growth, slipped too on persistent
worries over top consumer China, but traders said a pledge by
some of the country's smelters to cut production put the market
at risk of a huge short-covering rally.
China's 10 major copper producers have asked the government
to buy metal for its strategic stockpile, joining a growing
chorus in the country's stricken base metal industry that is
pleading for state intervention. ID:nL3N13Q3M8

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Global assets in 2015 http://link.reuters.com/dub25t
Currencies vs dollar http://link.reuters.com/tak27s
Commodities performance http://link.reuters.com/rac73w
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