European markets on Monday clung to the expectation of further
stimulus from the European Central Bank, with the yield on Spanish
government debt sinking to a record low in quiet holiday-time
trading.
The yield on the country's 10-year bonds dropped 0.03 percentage
point to 1.68%. Yields fall when prices rise; for these bonds,
yields stood at over 4% in January. Greek government bond yields
fell back 0.07 percentage points to 8.36%--a level last seen on
Dec. 5. The Stoxx Europe 600 index rose 0.77% to 342.9 as stock
markets across Western Europe registered modest gains.
Last week, ECB executive board member Benoît Coeuré boosted
hopes of a government bond-buying program when he told The Wall
Street Journal that it is "not that much of a question on whether
we should do something, but more a discussion on the best way to do
it." Pimco, a bond manager that handles $1.9 trillion of assets,
predicted in its December outlook published last week that the ECB
will announce a bond buying program of EUR500 billion ($613
billion) to EUR1 trillion centered on government bonds at either
its January or March 2015 meeting.
Also Monday, Brent crude oil prices rose by 3.8% in a pickup
that follows a decline of over 40% this year. Saudi Arabia said
Sunday that the Organization of the Petroleum Exporting Countries
is unlikely to reduce output, but added that it predicts a rebound
next year.
Currency markets were largely sleepy, but the U.S. dollar rose
to 119.84 against the Japanese yen from 119.50, while the euro was
up slightly at 1.2260 against the buck.
The ruble continued to recover a torrid week that saw the
currency plummet to 80 against the dollar despite the Central Bank
of Russia raising interest rates by 6.5 percentage points to 17%.
On Monday the ruble strengthened by 4% against the U.S. dollar to
57.
The Nigerian naira also recovered slightly to 184.45 against the
dollar from 186.80 at the open. The oil price slump has hit Nigeria
hard, with the country relying on oil for around 80% of government
revenue, according to the International Monetary Fund.
Last week, the Nigerian central bank banned dealers from
depositing currency-trading funds overnight in an effort to stem
the slide in the naira.
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