Reuters logo
GLOBAL MARKETS-Stocks, oil rise on robust ECB loan offer
February 29, 2012 / 3:52 PM / 6 years ago

GLOBAL MARKETS-Stocks, oil rise on robust ECB loan offer

* ECB liquidity boost lifts equities, commodities
    * European banks borrow record 530 bln euros at ECB tender
    * Stocks, bonds pare early gains after revised US GDP data
    * Chicago PMI report also adds to investor sentiment
    * Oil prices recover after two days of losses

    By Herbert Lash and Richard Hubbard	
    NEW YORK/LONDON, Feb 29 (Reuters) - The European
Central Bank's latest offer of cheap loans lifted stocks and
commodities on Wednesday, driving demand for higher-yielding
currencies at the expense of the euro, but worries over the
region's long-simmering debt crisis remain.	
    A second reading of U.S. gross domestic product in the
fourth quarter and a barometer of Midwest business activity that
were better than expected added to the bullish mood, helping the
U.S. dollar and the euro to pare earlier losses. 	
    GDP expanded at a 3 percent annual pace, a step up from the
2.8 percent pace that was reported in January, on slightly
firmer consumer and business spending, calming fears of a sharp
slowdown in growth early this year. It was GDP's quickest pace
since the second quarter of 2010, the Commerce Department said.	
    "It's two tenths of a percent. I don't think that's going to
change the tone of the discussion," said Tom Porcelli, chief
U.S. economist at RBC Capital Markets in New York.	
    Chicago Purchasing Management index rose to 64.0 in
February, above consensus forecast of 61.5 and January's 60.2. 	
    U.S. government debt also pared early gains, with the
10-year U.S. Treasury note trading 11/32 lower, with
yields rising to 1.98 percent. The benchmark U.S. bonds had been
up 5/32 in price before the GDP report and Chicago PMI report.	
    Stocks on Wall Street opened higher. The Dow Jones
industrial average was up 42.84 points, or 0.33 percent,
at 13,047.96. The Standard & Poor's 500 Index  was up
5.24 points, or 0.38 percent, at 1,377.42. The Nasdaq Composite
Index  crossed 3,000 and then eased back to 2988.1.	
    About 800 banks took 530 billion euros ($711.45 billion) at
the ECB's second-ever offering of 3-year loans, essentially in
line with market expectations.	
    The liquidity boost, which comes to more than 1 trillion
euros when combined with a similar offering in late December, is
expected to support demand for riskier assets like equities,
commodities and peripheral European bonds.	
    The ECB has removed the chances of a major collapse in the
banking system and effecting the entire economy, said Mouhammed
Choukeir, the chief investment officer at British private bank 
Kleinwort Benson.	
   "We're a bit more upbeat on risk as a result of this action
by the ECB, but we're by no means thinking that the sovereign
crisis in Europe is over," he added.	
    The loan tender helped the FTSEurofirst 300 index
of top European shares gain by 0.6 percent t 1,082.09 points,
putting it back on track toward seven-month highs. 	
    The MSCI's world equity index was up about
0.6 percent after Asian stocks rose to a seven-month high
earlier in the day.	
    "The ECB's two long-term liquidity injections do not solve
the underlying solvency problems in the euro area but they could
push the crisis back into remission for a while if they give
economic growth a boost," Trevor Greetham, director of asset
allocation at Fidelity Worldwide Investment said.	
    "We moved overweight equities and commodities in our
multi-asset funds in February for the first time since July
    Commodities like gold, silver and copper have surged this
year as central banks around the world loosen monetary policy to
support global economic recovery while inflation pressures
remain subdued.	
    The market remained focused on U.S. Federal Reserve Chairman
Ben Bernanke's semi-annual testimony on monetary policy before
the House Financial Services Committee.	
     Federal Reserve Chairman Ben Bernanke said on Wednesday the
uneven U.S. economic recovery will have to pick up in order to
quickly bring down an unacceptably high jobless rate.	
       "The job market is far from normal," he said in comments
prepared for delivery to the House of Representatives Financial
Services committee, suggesting another round of Fed bond 	
buying to stimulate growth is not off the table as policymakers
assess whether job market gains will persist. 	
    The U.S. dollar has been weakening against a range of
currencies since mid-January and has fallen substantially
against the Japanese yen since the Bank of Japan eased
policy unexpectedly on Feb. 14.	
   However, the euro, which is also seen as a riskier
asset, fell slightly against the U.S dollar to $1.3449 after the
ECB tender result came out, trading just below a near
three-month peak of $1.3487 set on Friday.	
    Traders said that as the result was in line with
expectations and had been more or less priced in, the euro's
scope for gains was limited and the excess liquidity was likely
to boost carry trades, in which investors use lower-yielding
currencies to buy riskier assets, which would weigh on the euro.	
    The improved risk sentiment had an immediate spillover into
the peripheral European government debt market, with Italian
two-year bond yields falling 24 basis points to 2.27 percent
, their lowest level since late 2010.	
    The benchmark 10-year Italian bond yield also extended its
fall to the lowest since September at 5.27 percent
    Oil prices recovered after sharp losses on Tuesday, with
Brent crude rising over $1 a barrel higher to $122.80.
Oil has risen sharply this year, raising concerns over global
economic growth going forward.	
    U.S. crude gained 38 cents to $106.93 a barrel.

0 : 0
  • narrow-browser-and-phone
  • medium-browser-and-portrait-tablet
  • landscape-tablet
  • medium-wide-browser
  • wide-browser-and-larger
  • medium-browser-and-landscape-tablet
  • medium-wide-browser-and-larger
  • above-phone
  • portrait-tablet-and-above
  • above-portrait-tablet
  • landscape-tablet-and-above
  • landscape-tablet-and-medium-wide-browser
  • portrait-tablet-and-below
  • landscape-tablet-and-below