* Euro tumbles as ECB surprises with a rate cut
* European shares scale fresh 5-year highs
* Dollar add to its gains after strong U.S. Q3 GDP data
* Brent oil hits 4-month low at $104.20 a barrel
LONDON, Nov 7 (Reuters) - An unexpected cut in rates by the European Central Bank sent the euro sharply lower on Thursday and gave an instant boost to stocks and major government bond prices in Europe.
U.S. stock futures turned higher on the decision as well, pointing to a firm start on Wall Street, where traders were also digesting the implications of mixed third-quarter GDP data for the Federal Reserve's next policy move.
The ECB's decision to cut rates to a record low of 0.25 percent was the biggest surprise and followed months of grumbling by governments and bankers over the impact of a strong euro on the region's fragile recovery and weak inflation rate.
"We wanted a stronger response to the stronger euro/dollar and we've got it," said David Bloom, global head of FX strategy at HSBC.
Speculation had grown after a shock, sharp fall in October inflation that the bank could move, although market pricing showed most had backed off that idea by the time of today's meeting, expecting instead only some sort of hint of a future cut.
The euro slid more than 1 percent after the decision, hitting a seven-week low of $1.3356 and down from around $1.3490 just before the ECB announcement.
"The market had not priced in a cut. So the euro will head lower and we can see it move towards the $1.32 area," said Alvin Tan, currency strategist at Societe Generale.
Euro zone bond yields also fell sharply. Two-year German yields fell to their lowest levels since June, down 6.2 basis points at 0.08 percent, while Italian yields hit a new five-month low.
In European stock markets the blue chip Euro STOXX 50 index jumped 1.3 percent to 3,083.40 points, extending a run of five-year highs. The pan-European FTSEurofirst 300 index rose 1.25 percent.
MSCI's broad world equity index, tracking share moves in 45 countries, was down around 0.2 percent after a weaker session in Asia earlier, though it is still near its best level since the start of 2008.
The dollar meanwhile gained impetus from the U.S. figures, showing the American economy grew faster than expected in the third quarter while initial claims for unemployment benefits fell slightly.
But the breakdown of the data also showed that the expansion in consumer spending was the slowest in two years, pointing to an underlying weakness and a more mixed bag of signals for Federal Reserve policymakers.
The numbers put yet more emphasis on U.S. nonfarm payrolls on Friday for investors trying to decipher when the Fed will return to the issue of starting to reduce an $85 billion-a-month bond-buying programme that has undermined the dollar.
The dollar rose as high as 99.31 yen, up 0.7 percent on the day, compared with 98.75 before the data.
Among commodities, gold hit a high of $1,325.31 after the ECB move as the ultra loose monetary policy tends to the cost of holding non-yielding bullion, while stoking fears of inflation.
However Gold has proved sensitive recently to pressure from a stronger dollar and its gains were soon reversed directions and its shed one percent to be close to $1,300 an ounce as the dollar gained after the U.S. GDP figures
The stronger dollar, plentiful supplies and progress in talks between Iran and the West over Tehran's disputed nuclear programme all weighed on oil prices, pushing Brent crude down by over $1 a barrel to a low of $104.20.