Stocks jump, dollar gains on Fed, ECB outlooks

January 8, 2015

London (Jan 8)  Global equity markets surged and the dollar hit a nine-year high on Thursday, lifted by the Federal Reserve's confidence in the U.S. economy and hopes of aggressive new stimulus in Europe.

Stocks on Wall Street rose 1.8 percent and European stocks jumped nearly 3 percent as investors set aside fears from a few days ago that tumbling oil prices point to a global slowdown.

Brent oil fell and U.S. crude traded flat, while prices for U.S. and German government debt fell on growing speculation the European Central Bank will launch a bond-buying program to combat slowing economic growth.

In the latest sign of a strong U.S. economy, the number of Americans filing new claims for unemployment benefits fell last week and job cuts declined sharply in December, indicating a tightening labor market.

In Europe, ECB President Mario Draghi said the bank's

Governing Council stands ready to take unconventional measures

if needed to stem a prolonged period of low inflation.


    The Fed appeared in minutes released Wednesday from its

December policy-setting meeting to conclude firmly that the U.S.

recovery is on track despite a global deflation threat and

potential turmoil from plunging oil prices.

    "The decline in the price in oil, sure it spoke volumes

about potential headwinds for the global economy," said Andrew

Wilkinson, chief market strategist at Interactive Brokers LLC in

Greenwich, Connecticut. "But it seems as ever investors are more

optimistic about the likely response from global central banks

and that turned confidence around."

    MSCI's all-country world stock index rose

1.92 percent, while the FTSEurofirst 300 index of top

European shares surged 2.87 percent to close at 1,368.37. The

German, French and Italian stock

market indexes each rose more than 3 percent.

    On Wall Street, the Dow Jones industrial average was

up 307.84 points, or 1.75 percent, at 17,892.36. The Standard &

Poor's 500 Index was up 35.54 points, or 1.75 percent, at

2,061.44. The Nasdaq Composite Index was up 84.36

points, or 1.81 percent, at 4,734.83.

    A slump in German industrial orders in November and a drop

in euro zone consumer inflation expectations reinforced bearish

views of the euro as the U.S. data also helped push the single

currency to a nine-year low, for a fifth day of losses.

    The euro fell to $1.17540, its lowest since

December 2005, on the EBS trading platform, and last traded at

$1.1786, a decline of 0.43 percent.

    The euro's weakness kept the dollar index at

nine-year highs. Against the yen, the dollar climbed to 119.73

yen, up 0.4 percent.

    Global benchmark Brent oil fell below $51 a barrel as bulls

and bears searched for a floor to the prolonged rout.

    Brent crude fell 19 cents to settle at $50.96 a

barrel. U.S. crude rose 14 cents to settle at $48.79 a


    U.S. Treasury debt prices declined as Wall Street rallied

and U.S. oil prices steadied and on the expectations for an ECB

bond-buying program.

    Prices of benchmark 10-year Treasuries were off

19/32 to yield 2.016 percent, after dipping below the 2 percent

level on Tuesday for the first time since October.

    The yield on the German 10-year bund rose to

0.512 percent.

    "What's going on in Treasuries has nothing to do with what

is going on in the U.S. and everything to do with what is going

on in Europe and with what is going on in the energy complex,"

said Eric Green, head of U.S. rates and economic research at TD

Securities in New York.

Source: Reuters

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