Shares, euro rise on ECB action hopes, Bunds dip

27.07.2012 10:18


(Reuters) - World stocks extended gains and the euro edged higher on Friday as markets bet on new intervention from the European Central Bank to help stop debt market pressure on peripheral euro zonecountries from spiraling out of control.

ECB President Mario Draghi's promise on Thursday to do whatever it takes within the bank's mandate to defend the single currency prompted a rise in shares and the euro, as well as a fall in German Bund prices and an easing in yields on Spanish bonds. All those trends continued on Friday.

At 03.02 a.m. EDT, world stocks .WORLD were up 0.5 percent, while blue-chips in the euro zone .STOXX50E climbed 0.3 percent.

The euro was up 0.1 percent at $1.2289, Bund futures were down 25 ticks to 143.76 and 10-year bond yields in Spain, in the frontline of the debt market attack, eased to 6.9 percent.

Draghi's remarks were short on detail but some people speculated that the ECB could announce after its policy meeting next Thursday that it will start buying bonds again under its Securities Market Programme (SMP).

"Mr Draghi's comments have intensified the interest leading into next week's ECB meeting where the market is now expecting, at a minimum, a further 25 basis point (interest) rate cut, with the hopes of some SMP intervention for good measure," Cameron Peacock, Market Analyst IG Markets, said in a trading note.

However, the ECB has not bought bonds for months under the program which has drawn criticism of its effectiveness.

The bank could also "raise the bar" for the U.S. Federal Reserve, which meets a day before the ECB, said Peacock. Recent poor data in the world's largest economy has left many in the market hoping for signs the Fed would do more to stimulate growth.

Hopes for more action from the major central banks also underpinned gains in a range of commodities that would benefit from increased demand following any liquidity boost, with U.S. crude oil up 0.6 percent and copper up 0.8 percent.

(editing by David Stamp)



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