By Emelia Sithole-Matarise
LONDON (Reuters) - European shares hit a 14-year high and the euro fell on Wednesday after the European Central Bank affirmed its loose policy stance and as weak data from China raised prospects of monetary easing there too.
A German auction saw 10-year borrowing costs for the euro zone's biggest economy reach a new record low.
Firmer commodity prices and merger news also helped hoist European stocks, and U.S. stock index futures pointed to a firmer start on Wall Street, bucking a softer trend in Asia.
Financial markets remain broadly driven by policy actions of the world's major central banks and Tuesday's softer U.S. retail sales supported the view that the Federal Reserve will not rush to raise interest rates in June.
The ECB kept rates unchanged at record lows at its meeting earlier in the day, and is also tipped to quash talk it might scale down sooner than planned the 1 trillion euro quantitative easing scheme it launched last month.
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Data earlier showed growth in China's economy slowed to a six-year low of 7 percent in the first quarter -- better than many feared after a woeful trade performance in March.
But both retail sales and industrial output missed forecasts, intensifying Beijing's struggle to find the right policy mix to shore up activity.
"Unless one can make a very good case or suggestion that we'll see a rebound in April or May then it does look as if more easing from the People's Bank (of China) is on the cards," said Investec chief economist Philip Shaw.
The pan-European Eurofirst 300 index of leading shares rose 0.8 percent to 1,653.62 points, its highest since late 2000. News that Finnish telecom equipment maker Nokia has agreed to buy France's Alcatel-Lucent helped the push higher.
Britain's FTSE 100 index hit a fresh high, helped by gains in fashion chain Next, retailer Dixons Carphone and drugs firm AstraZeneca
In Asia, Shanghai stocks were volatile, falling more than 1 percent after the data but recovering subsequently to be marginally positive for the day.
Shanghai, which has been rising for six weeks as investors have chosen to focus on the prospect of extra policy stimulus, looks overdue for some consolidation, some analysts say.
ECB FOCUS
The euro held losses against the dollar after the rate decision. ECB President Mario Draghi is expected to reiterate at his post-meeting press conference that the bank intends to fully deliver its 60 billion euros a month QE programme as risks to growth remain and inflation continues to be subdued.
He also faces questions on a German newspaper report that Berlin was working on a plan that would allow Greece to receive financing from the ECB even if it missed payments to creditors. https://bsmedia.business-standard.comgraphics.thomsonreuters.com/15/ecb-qe/index.html
The euro was down 0.7 percent at $1.058 and was 0.5 percent lower against the yen at 126.53 yen. The common currency struck a one-month low against the dollar of $1.05205 on Monday.
German 10-year borrowing costs, the benchmark for euro zone debt, fell close to zero as a Bund auction showed there were enough private investors willing to compete with the ECB for the top-rated, almost yield-free paper.[GVD/EUR]
"We are very, very close to negative (yields) in the 10-year market," said Cyril Regnat, fixed income strategist at Natixis. "I know guys in this market willing to test this zero bound."
Brent crude oil prices rose above $59 a barrel after a forecast that U.S. shale oil output would record its first monthly decline in more than four years, and on tensions in the Middle East.
U.S. crude futures were up 59 cents at $53.87 a barrel, having risen 3.3 percent on Tuesday.
(Additional reporting by Marius Zaharia; Graphics by Vincent Flasseur; Editing by Catherine Evans)