* European shares, Japan's Nikkei hits 3-month peak
* Fed minutes reaffirm Dec hike, cautious on further moves
* Dollar eases from highs, EM rallies
* Bank of Japan maintains stimulus, ECB minutes due later
By Marc Jones
LONDON, Nov 19 (Reuters) - World shares and risk assets
rallied and the dollar backed off highs on Thursday, after the
Federal Reserve flagged a rate hike next month, but also an
intention to take things slow and steady after that.
The pick-up in risk sentiment combined with the dip in the
dollar .DXY gave commodities a reprieve from recent selling,
with oil LCOc1 and gold XAU= inching higher.
European stocks also opened strongly with the FTSEurofirst
300 .FTEU3 pushed to a three-month high by more than 1 percent
gains in London .FTSE , Frankfurt .GDAXI and Paris .FCHI ,
after Japan's Nikkei .N225 had hit a similar peak in Asia.
Minutes of the Fed's last policy meeting showed most members
were ready to sanction the bank's first rise in rates in almost
a decade in December as long as further moves then depended on
the economy continuing to perform well.
"We have had an interesting FOMC minutes and risk assets
have rallied across the board with the dollar weaker and EM
leading the way," said Alvin Tax an FX strategist at Societe
Generale in London.
"That is the success of the Fed really. We expect they will
hike in December but then proceed slowly after that and that has
soothed markets."
Leaps across Asia meant MSCI's benchmark emerging market
share index .MSCIEF was on course for its best day in a month
and the 45-country All World equivalent .WORLD was up for a
fourth straight day.
Bond markets also seemed to get the message that the Fed was
in no rush with rates with longer-term debt outperforming and
the yield curve flattening noticeably. While two-year yields
US2YT=RR rose 3 basis points, those on 30-year paper
US30YT=RR actually dipped a basis point.
Yields were also lower across most of Europe and Asia. The
premium offered by U.S. two-year debt over its German
counterpart yawned out to 124 basis points, the fattest margin
since 2006 and a positive for the dollar.
However, being long dollars has been a very crowded trade
and investors decided to book some profits in the wake of the
Fed minutes. Against a basket of currencies .DXY the dollar
dipped 0.4 percent and away from a seven-month peak.
The euro edged up to $1.0682 EUR= and off a seven-month
trough around $1.0615. The dollar also eased against the yen to
123.25 JPY= , after touching a three-month peak of 123.67.
Minutes of the European Central Bank's last policy meeting
are due later on Thursday and will likely reinforce expectations
of further easing from Frankfurt in December.
Peter Praet, the ECB's chief economist kept up the
speculation saying the so called "zero lower bound" for interest
rates was lower than most had originally thought.
COMMODITY RELIEF
In Asia overnight, the Bank of Japan surprised no one at its
regular policy meeting by maintaining the current pace of asset
buying, though many still suspect it will have to ease again at
some point to force inflation higher.
Tokyo's Nikkei .N225 firmed 1 percent, brushing aside a
disappointing report on exports and imports.
MSCI's broadest index of Asia-Pacific shares outside Japan
.MIAPJ0000PUS rose 2 percent, with Australia's main index
AXJO up by the same amount for a third straight session of
gains.
After a slow start, Chinese markets caught the better mood
and the CSI300 index .CSI300 of the largest listed companies
in Shanghai and Shenzhen added 1.6 percent. .SS
In commodity markets, gold XAU= added 0.6 percent to
$1,077.20 an ounce having been at its lowest since early 2010.
Zinc, copper, lead and nickel were all near their lowest in five
to seven years.
Oil prices rose from three-month lows on short-covering.
U.S. crude CLc1 steadied at $40.65 a barrel, while Brent
LCOc1 firmed 20 cents to $44.34.
"People are seeing oil at these very low levels and so they
want to step in," said Hans van Cleef, senior energy economist
at ABN Amro in Amsterdam.