Stocks Advance as ECB Extends Asset Purchases -- 4th Update
09 December 2016 - 12:58AM
Dow Jones News
By Riva Gold
Stocks extended a winning streak on Thursday, while government
bonds came under pressure after the European Central Bank extended
its asset purchase program but at a lower volume than expected.
Futures suggested U.S. stocks would open 0.1% higher, after
major bourses closed at fresh records in their steepest best day
since the presidential election.
The Stoxx Europe 600 wavered but quickly rebounded to trade up
0.6% after the ECB said it would extend its bond-purchase program
by nine months to the end of 2017, but would reduce its monthly
purchase volume from EUR80 billion ($86.2 billion) to EUR60 billion
as of April.
Investors were looking ahead to the ECB's press conference with
President Mario Draghi for further details on changes to the
parameters of its asset purchase program, amid concerns the bank is
running out of bonds to buy.
The euro strengthened slightly to trade up 0.4% at $1.0798 after
the decision but quickly shed most of its gains and was last flat
at $1.0756.
Yields on 10-year German bunds shot up to 0.449% from around
0.385% ahead of the decision, while Italian yields rose to 2.050%
from 1.968%.
"Even without calling this tapering, the ECB just announced
tapering," said Carsten Brzeski, chief economist at ING.
Recent comments from ECB officials had emphasized the importance
of preserving stimulus, a message that bond investors appeared to
have taken to heart. Riskier European debt and Italian debt had
rallied earlier this week despite the concerns emanating from the
Italian referendum, a move some attributed to expectations for an
extension of quantitative easing.
Even as inflation remains shy of the ECB's target, eurozone
economic data have been better than forecast recently, and the euro
has weakened against a rising dollar, alleviating some of the
pressure for further stimulus measures.
"This is their last hurrah," said Jordan Rochester, strategist
at Nomura.
The moves also come amid a global selloff in long-dated
government bonds on expectations that U.S. policy will be
reflationary. The yield on the 10-year U.S. Treasury note was last
at 2.408% from 2.347% on Wednesday.
Investors have bet that the Trump administration will bring
about tax cuts, deregulation and fiscal stimulus, supporting growth
and inflation in the world's largest economy and buoying U.S.
stocks while pressuring government bonds.
"The promise of fiscal policy is certainly encouraging. but we
have to discern the difference between posturing and policy from
our president-elect," said Eric Wiegand, portfolio manager at U.S.
Bank Wealth Management. "Tax policy and trade policy are very big
issues for us, and we're anxious to get a sense of actual
policy."
Markets in Asia closed higher earlier Thursday after a rally on
Wall Street sent both the S&P 500 and Dow Jones Industrial
Average to record highs.
Health care was the only S&P 500 sector to decline
Wednesday, while Pfizer Inc., Johnson & Johnson and Merck &
Co. were the only three stocks in the Dow to lose ground, following
comments on drug pricing from President-elect Donald Trump.
Those moves were echoed in Europe on Thursday, with the health
care sector down 0.4% even as wider markets advanced.
Earlier, Japan's Nikkei Stock Average rose 1.5% on Thursday,
while Australian stocks added 1.2%.
Markets in Hong Kong added 0.3% while Shanghai stocks fell 0.2%
with sentiment subdued in Chinese markets by authorities' increased
scrutiny of aggressive stock purchases by some insurance
companies.
Tom Fairless and Kenan Machado contributed to this article.
Write to Riva Gold at riva.gold@wsj.com
(END) Dow Jones Newswires
December 08, 2016 08:43 ET (13:43 GMT)
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