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Shares near all-time high; bond yields slip to 11-month lows

By Francesco Canepa

New York (Reuters) - Global equity markets hovered just off all-time highs on Thursday as investors brushed off a weaker-than-expected reading on the U.S. economy, while benchmark U.S. Treasury yields fell to 11-month lows.

On Wall Street, the S&P 500 hit another intraday high early in the session despite first-quarter GDP data showing the U.S. economy contracted 1 percent. Better-than-expected jobless claims pointing to a strengthening labor market and merger and acquisition activity also boosted sentiment.

The dollar trimmed early losses against major currencies as traders focused on signs of the U.S. economy strengthening.

"Once you get beyond the headline number and look under the hood, things don't really look so bad," said Boris Schlossberg, managing director of FX strategy at BMO Capital Markets in New York. "Inventories were to blame for a lot of it and that bodes well for the future."

The dollar, which had given back many of its gains on , reclaimed some of Wednesday's losses against the euro and the British pound after the GDP report.

The MSCI World Index, which has gained 1.4 percent since the last ECB policy meeting, was up 0.9 percent.

Wall Street's Dow Jones industrial average was up 9.77 points, or 0.06 percent, at 16,642.95. The Standard & Poor's 500 Index .SPX was up 3.39 points, or 0.18 percent, at 1,913.17. The Nasdaq Composite Index was up 11.92 points, or 0.28 percent, at 4,236.99.

European shares held near multi-year highs, with the pan-European FTSEurofirst 300 index close to a near six-year peak reached earlier this week.

The euro, which had fallen around 2 percent against the dollar over the same period, consolidated just above a three-month low of $1.3584.

Yields on benchmark 10-year Treasuries last traded at 2.409 percent. The yield on 30-year bonds was 3.273 percent, an 11-1/2-month trough.

While U.S. yields have fallen on economic worries and some safe-haven demand tied to conflict in Ukraine, analysts attribute the move to a technical factors, including month-end portfolio rebalancing and exiting bets on rising yields.

German bond yields held at the lowest levels in a year and on course to record a fifth consecutive month of declines on bets the European Central Bank would unveil new stimulus measures next week.

ECB policymakers have opened the door to a rate cut, effectively charging banks to hold cash at the central bank overnight, and to a refinancing operation aimed at supporting businesses when its board meets on June 5.

Gold extended losses to a third straight session, hitting 16-week lows as the dollar hovered near a two-month high, while weak physical demand in top buyer China also weighed.

Spot gold fell to $1,251.50 an ounce - its lowest since Feb. 4 - in early trade and was down 0.4 percent at $1,253.33. It dropped nearly 3 percent over the past two sessions.

Oil rose on signs of stronger demand from top oil consumer the United States. Brent LCOc1 was up 55 cents at $110.36 a barrel after losing 21 cents on Wednesday. U.S. crude oil CLc1 gained 51 cents to $103.23.

(Reporting by Angela Moon; Editing by Dan Grebler)

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