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ECB expected to cut euro zone rates for first time since

2019

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World stocks on cusp of fresh record high

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Nvidia ( NVDA ) overtakes Apple as world's second most valuable

firm

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Graphic: World FX rates http://tmsnrt.rs/2egbfVh

By Marc Jones

LONDON, June 6 (Reuters) - World stocks were on the

brink of an all-time high and the euro rose on Thursday ahead of

what was widely expected to be the European Central Bank's first

interest rate cut in nearly five years.

With the long-awaited moment about to arrive, traders pushed

the pan-European STOXX 600 up 0.3% in early deals and

watched the MSCI 47-country main world index

inch to within a point of a seemingly inevitable new peak.

Sentiment was almost at frenzy stage again. Wall Street's

S&P 500 and Nasdaq had both set new records on Wednesday after a

now $3 trillion AI juggernaut Nvidia ( NVDA ) swept past Apple

to become the world's second-most valuable company,

behind Microsoft ( MSFT ).

The euro was on the rise again too. It added another 0.1% to

its 2% rise over the last month to reach just shy of $1.0880,

although most traders were sitting on their hands, waiting to

see what the ECB signals later.

All 82 economists polled by Reuters expect the

Frankfurt-based central bank to trim its key rate to 3.75% from

the record high 4.0% level it has been at since September, but

what it does after that remains subject to much debate.

EU elections happen in the coming days but

stronger-than-expected data over the last few weeks has raised

doubts about how many more cuts will be justified this year.

Euro zone inflation rose more than predicted in May, fuelled

by price growth in the services sector, which some policymakers

single out as especially relevant because it reflects domestic

demand.

This was likely to mirror larger-than-expected increases in

wages in the first quarter of the year, which boosted consumers'

battered disposable income after years of below-inflation pay

hikes.

Michael Metcalfe, head of global macro strategy at State

Street Global Markets, said for this meeting though, it was hard

to remember a central bank move more well flagged in advance.

"Maybe today is going to mark something of a watershed as

they (ECB) are not going to be able to be as clear with their

forward guidance," Metcalfe said

Considering the recent robust data, "what follows is now a

much harder question for markets - and the ECB - to assess," he

added. "It could be a classic buy-the-rumour-sell-the-fact and

the euro get some support from here."

GOLDILOCKS STORY

The Bank of Canada pipped the ECB to being the first G7

country to cut rates in this cycle on Wednesday. The U.S.

Federal Reserve meets next week although isn't expected to move

until September. By contrast, the debate at the Bank of Japan,

which meets the week after, will be on if and when to raise

rates.

Canada's dollar trimmed some of the losses from its

post-cut dip on Thursday to leave it at C$1.3679 per U.S.

dollar.

In the bond markets, Germany's 2-year government bond yield

, which is sensitive to policy rate expectations, was

down 0.5 bps at 2.98%. It hit 3.125% on Friday, its highest

since mid-November.

Benchmark 10-year U.S. Treasury yields were sitting near

their lowest in two months, after data this week hinted that the

U.S. labour market is finally cooling.

That included private U.S. payrolls on Wednesday and a

report on Tuesday that showed job openings fell in April to the

lowest in more than three years.

Markets are now pricing nearly two full 25 basis point Fed

cuts again this year, with a September move seen as a 68% chance

compared to 47.5% last week.

"We're still in the Goldilocks range so bad economic news

has been good for equities as Fed rate cuts are back on the

table," said Ben Bennett, Asia-Pacific investment strategist at

Legal And General Investment Management.

Investor attention will soon turn to the U.S. nonfarm

payroll report for May due on Friday, with a Reuters poll of

economists expecting it to increase by 185,000 jobs.

"We need that to be around 100-150k to maintain the

Goldilocks narrative," Bennett said. "Much higher than that and

yields could move back up, but if we get zero or negative, then

we could be talking about a hard landing again."

In commodities, Brent crude futures rose 0.48% to

$78.79 a barrel, while U.S. West Texas Intermediate crude

futures rose 0.63% to $74.54.

Spot gold rose 0.59% to $2,369 per ounce after a 1%

rise previously, while silver rose 1.34% to $30.41 per

ounce.

(Additional reporting by Ankur Banerjee in Singapore

Editing by Christina Fincher)