Global stocks up, oil slides as concerns ease over Russia-Turkey tension

By Jamie McGeever

LONDON (Reuters) - European stocks moved higher and oil prices reversed course and fell 1 percent on Wednesday as investors' concerns eased over the potential fallout of Turkey's shooting down of a Russian fighter jet.

A Reuters report that euro zone central bank officials are considering whether to stagger charges on banks hoarding cash or to buy more debt ahead of the next European Central Bank meeting pushed the euro lower.

At 0930 GMT the FTSEuroFirst 300 index of leading shares was up 0.8 percent at 1,493 points, Germany's DAX was up 0.7 percent at 11,015 points and Britain's FTSE 100 was up 0.8 percent at 6,329 points.

"Equity markets are moving higher as the dust settles from the political fallout between Russia and Turkey," said David Madden, market analyst at IG in London.

"Traders are viewing no reaction from Russia as good news, but many dealers are still keeping an eye on the Kremlin," he said.

Nevertheless, Russia said on Wednesday it will send an advanced air defence system to reinforce its air base in Syria and consider cancelling a raft of joint business projects with Ankara after one of its warplanes was downed.

MSCI's index of Asia-Pacific stocks outside of Japan inched down 0.1 percent, while MSCI's global index had slipped into negative territory.

U.S. stock futures pointed to a rise of around 0.2 percent at the open on Wall Street.

UK SPENDING PURGE

The news from Turkey briefly sparked oil supply fears and sent crude prices surging overnight to two-week highs. But the market slumped again at the open in Europe. U.S. crude and Brent crude futures fell 1 percent to $42.47 and $45.67 a barrel, respectively.

Prices of metals such as zinc and copper resumed their recent downtrend as the dollar rallied. This makes dollar-denominated metals more expensive for buyers. [MET/L]

Industrial metals are seen remaining under pressure in the long run with an expected Federal Reserve interest rate hike in December likely to underpin the dollar.

In currencies, the U.S. dollar roared back after the Reuters report on the ECB weighing up further policy easing. The euro slid nearly half a cent to trade down on the day at $1.0629. Against the yen, the dollar bounced back from a one-week low to trade up at 122.55 yen.

The dollar index against a basket of major currencies moved back up to 99.78, approaching the 8-month peak of 100.000 set on Monday.

The dollar's upside, however, was kept in check by U.S. bond yields. The benchmark 10-year U.S. note yield stood at 2.23 percent after touching a 3-week low of 2.206 percent overnight.

Benchmark euro zone bond yields were also down around 1-2 basis points, kept under pressure by the prospect of further ECB easing.

In Britain the focus was on finance minister George Osborne's latest push to lower the country's budget deficit through a series of massive spending cuts.

This follows comments earlier this week from top Bank of England officials that added weight to the view that interest rates will be kept lower for longer.

"The fiscal squeeze is one reason the financial markets expect such a time lag between a (U.S.) Fed rate increase and an increase from the BOE," said Derek Halpenny, senior currency strategist at BTMU in London.

"If Osborne sticks to his guns the pound may well remain under downward pressure over the near-term."

Sterling was down slightly against the dollar at $1.5080.

(Editing by Hugh Lawson; To read Reuters Global Investing Blog click on http://blogs.reuters.com/globalinvesting; for the MacroScope Blog click on http://blogs.reuters.com/macroscope; for Hedge Fund Blog Hub click on http://blogs.reuters.com/hedgehub)