Shares, euro edge up on ECB bond-buying hopes

SINGAPORE: Stocks edged higher on Thursday and the euro held on to the previous session's gains on hopes that the European Central Bank will unveil new tactics to curb surging borrowing costs in indebted euro zone states.
The
single currency jumped more than 1 cent on Wednesday to a high of
$1.2625 after a string of leaks from euro zone officials raised
expectations that the ECB will announce a bolder bond intervention plan
after Thursday's policy meeting.
"This meeting is absolutely
crucial, because expectations are extremely high. If the ECB does not
deliver, we will get into another bad patch," said Gilles Moec, senior
European economist at Deutsche Bank.
Euro
STOXX 50 index futures rose 0.2 percent, pointing to a firmer start to
trading, while financial spread betters in London called the FTSE 100
to open up around 0.3 percent. [.EU
The euro firmed a touch to about $1.2607, while the dollar was flat against a basket of major currencies.
Asian
equity markets pared earlier gains, with MSCI's broadest index of Asia
Pacific shares outside Japan rising 0.2 percent, while Japan's Nikkei
closed flat.
Australia's stock market led regional gains, rising
around 0.7 percent after a jump in copper prices in the previous
session boosted mining heavyweights Rio Tinto and BHP Billiton.
U.S.
stocks had largely ignored the European news on Wednesday, with the Dow
Jones Industrial Average gaining 0.1 percent but the broader S&P
500 easing 0.1 percent, hurt by a profit warning from economic
bellwether FedEx Corp .
"While
FedEx is only one company, it's one whose warning is indicative of the
global economic slowdown we're dealing with," said Leo Grohowski, chief
information officer at BNY Mellon Wealth Management in New York.
But
S&P index futures traded in Asia rose 0.3 percent on Thursday,
suggesting modest gains on Wall Street later as long as ECB President Mario Draghi does not disappoint investors at his 1230 GMT news conference.
ECB FACES CRUCIAL MOMENT
Renewed
ECB intervention in the euro zone's bond markets is seen by most market
economists as crucial for buying governments time to come up with a
longer-term response to the bloc's debt crisis.
The ECB said in
August it would start buying Spanish and Italian government bonds again
to ease pressure on those countries' borrowing costs, but only if they
first sought help from the euro zone's rescue fund and met strict
conditions.
Further details will be revealed later on Thursday,
with sources telling Reuters on Wednesday the central bank was ready to
waive seniority status - the right to be paid back first - on
government bonds it buys under a new programme.
That should encourage private investors wary of being pushed down the creditor pecking order by central bank interventions.
Some
reports suggested the ECB was ready to announce "unlimited" bond
purchases - meaning with no cap on the amount it was prepared to spend
- though sources told Reuters that was unlikely as the central bank
wanted to leave room for manoeuvre.
"I'm not sure if the ECB measures alone can boost the euro further from here," said Ayako Sera, senior market economist at Sumitomo Mitsui Trust Bank. "What's ultimately important is fiscal convergence."
Sovereign
bond markets welcomed the reports on Wednesday. Spanish and Italian
10-year yields fell 20 basis points and 16bp respectively to 6.42
percent and 5.51 percent.
Yields on U.S. Treasuries, in turn,
nudged higher in Asian trading on Thursday, with the benchmark 10-year
note edging up around 1 basis point to 1.601 percent.
Oil was
boosted by expectations that ECB action will support asset prices, with
U.S. crude climbing 0.6 percent to just shy of $96 a barrel and Brent
crude gaining 0.4 percent to around $113.50.
"Investors are pricing in the ECB meeting tonight," said Natalie Rampono, a commodity strategist at ANZ Bank.
"A
positive response in both the ECB meeting and U.S. payroll data due
later will be supportive of oil prices. If we see disappointment in the
data or the meeting, however, there will be the risk of a sell-off."
Gold edged back near its highest in almost six months, gaining around 0.3 percent to about $1,698 an ounce.
Gold,
typically a safe-haven asset, has often tracked the fortunes of the
euro and stocks, with investors selling the metal to cover losses in
other markets as the euro zone debt crisis caused turbulence in
financial markets. - Reuters