Reuters: US Dollar Report: GLOBAL MARKETS-ECB, BoE signals send shares, bonds higher, euro falls

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GLOBAL MARKETS-ECB, BoE signals send shares, bonds higher, euro falls Jul 4th 2013, 13:53 Thu Jul 4, 2013 9:53am EDT * ECB and BoE issue unprecedented guidance on policy outlook * Euro dips, sterling plunges after policy announcements * European shares jump more than 2 percent, FTSE soars * Oil eases as Egypt's president overthrown By Marc Jones and Richard Hubbard LONDON, July 4 (Reuters) - European stocks rose and the euro fell on Thursday as the region's top central banks pledged not to let stimulus withdrawal in the United States and renewed euro zone tensions derail the bloc's recovery. The European Central Bank kept its rates at a record low of 0.5 percent and the Bank of England left UK rates unchanged, also at 0.5 percent. However, both central banks accompanied their decisions with unprecedented guidance about the future direction of policy, making clear any interest rate rises were a long way off. ECB President Mario Draghi sent the euro to a five-week low of $1.2907 when he said rates in the currency bloc would stay where they are for an extended period or even fall. "The Governing Council expects the key ECB rates to remain at present or lower levels for an extended period of time," Draghi told a news conference. The Bank of England, after new governor Mark Carney's first policy meeting, earlier released a statements saying it could take steps if the recent rise in bond yields, which came after the U.S. central bank outlined plans to cut back its stimulus, persisted. Sterling fell 1.3 percent after the statement to $1.5074, its lowest since May 29, while London's FTSE 100 rallied sharply and was last up 2.9 percent. European shares rose 2.26 percent, their biggest one-day jump for 10 weeks, helping lift MSCI's world equity index by 0.5 percent. U.S. markets were closed for the Independence Day holiday had made gains on Wednesday as investors positioned for monthly jobs data on Friday. The numbers will be scoured for clues to when the Federal Reserve will begin to scale back its $85-billion-a-month stimulus programme. In fixed income markets German Bund futures reversed early losses and were sharply higher on the ECB hints about possible future rate cuts, while yields on riskier Spanish and Italian bonds fell. However, political tensions in Portugal, after the resignation of two government ministers this week put its hope of exiting its EU/IMF programme in doubt, hung over the region's bond market. Portuguese 10-year yields, an indicator of the cost the government would have to pay to borrow, rose back to 7.53 percent although it did not appear to have the momentum to break back above Wednesday's high of 8.2 percent. EGYPT ACTION In Egypt, the army overthrow of President Mohamed Mursi drew a positive reaction from investors. The country's five-year debt insurance costs fell 80 basis points and its stock market gaining 7 percent. With the threat of disruption in oil supplies from the Middle East seen as having eased after events in Cairo, Brent crude slipped to $105.32 a barrel from a two-week high. Other commodity markets saw limited moves before Friday's U.S. data. The U.S. holiday limited trading in gold, which edged down to about $1,248 an ounce, though the troubles in Portugal and Egypt prompted some safe-haven buying. Growth-attuned copper hovered near a two-week high. "If we get a sense that U.S. growth is not where people think it might be yet, that could undermine the dollar and be in general more supportive for commodity prices," said Barclays commodities analyst Sijin Cheng. Link this Share this Digg this Email Reprints

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