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Swiss National Bank cuts rates; European Central Bank

decision

due

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Yen weakens on Reuters report BOJ may skip hike next week

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Yuan stabilises after PBOC keeps official midpoint steady

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Crude extends gains amid threat of more Russia sanctions

(Updates with midday trading, refreshes prices)

By Amanda Cooper

LONDON, Dec 12 (Reuters) - Stocks edged lower on

Thursday and the euro was steady ahead of a European Central

Bank monetary policy decision, while investor sentiment was

supported by U.S. consumer inflation data that cemented bets for

a Federal Reserve interest rate cut next week.

In a busy day for central bank decisions, the Swiss franc

weakened after the Swiss National Bank cut rates by half a

point, its largest reduction in nearly 10 years, which hit the

franc. Markets had priced a good chance of a half-point cut in

the run-up to Thursday's meeting.

The dollar eased against a range of other currencies, as

investors took profit on some of the market's strength ahead of

Wednesday's inflation reading, which showed the consumer price

index (CPI) rose exactly in line with expectations in November.

Europe's STOXX 600 dipped in midday trading, while

Swiss stocks rallied sharply following the SNB's rate

cut. U.S. stock index futures were down 0.2-0.4%

Overnight, the tech-focused Nasdaq shot up 1.8% to

close above 20,000 for the first time, while the S&P 500

climbed 0.8%.

"The U.S. CPI print lit a flame in U.S. equity," said Chris

Weston, head of research at Pepperstone.

"The market has essentially seen one of the last remaining

obstacles that could derail sentiment out of the way", he said,

"seeing the coast somewhat clearer for the illustrious seasonal

chase of returns to play out into year-end."

Traders now place a 97% chance on a quarter-point Fed cut on

Dec. 18.

Higher U.S. Treasury yields prevented the dollar from

straying too far below two-week highs, after data showed an

increase in the U.S. budget deficit.

Ten-year Treasury yields rose on Thursday by 3

bps to 4.302%, set for a rise of 14 bps this week, their largest

weekly increase since late October.

CENTRAL BANK FOCUS

The dollar fell against the Japanese yen to trade down 0.2%

at 152.20 after Reuters reported that BOJ policy

makers were inclined to forgo a hike on Dec. 19 and wait for

more data on wages at the start of next year.

The Australian dollar surged on unexpectedly strong

employment data, rebounding from Wednesday's weakness following

a Reuters report that Beijing is considering allowing the yuan

to depreciate further next year. China is Australia's top

trading partner and the Aussie is often used as a liquid proxy

for the yuan.

The yuan held its ground above a one-week low after the

central bank kept the official midpoint for the currency stable,

to last trade at 7.268, leaving the dollar down 0.18% in

offshore trading.

The Swiss franc was last down 0.4% at 0.8881 to

the dollar, following the SNB decision. Against the euro

, the franc was down 0.4% at 0.93195.

"Cutting the policy rate by 50 basis points is the right

decision, as inflation risks are on the downside and the economy

is growing below potential, while Switzerland's main exports are

struggling with structural and cyclical problems," Karsten

Junius, chief economist at J Safra Sarasin, said.

The euro was steady at $1.0494 after dipping to a

one-week trough overnight. The ECB is widely expected to cut

euro zone rates by 25 basis points later in the day.

Traders will focus on what central bank President Christine

Lagarde signals about the outlook for growth and inflation in

the months to come, given the political instability in France

and Germany right now, as well as the risk of tariffs from the

incoming U.S. administration led by Donald Trump.

Gold briefly traded at a more than one-month high,

driven by the prospect of more rate cuts from the Fed and lower

bond yields. It was up 0.3% at $2,710 an ounce, having earlier

risen to $2,725.79 for the first time since Nov. 6.

Crude oil extended its rally this week, lifted by the threat

of additional sanctions aimed at stifling Russian oil output.

Brent crude futures were flat at $73.49 a barrel,

while U.S. crude futures were steady at $70.36.

(Additional reporting by Kevin Buckland in Tokyo; Editing by

Edwina Gibbs, Michael Perry, Angus MacSwan, William Maclean)