Stocks near record high after ECB talks of 'forceful' support

LONDON (Reuters) – Stocks rose to near lifetime highs on Thursday after the European Central Bank pledged to keep interest rates at record lows for even longer to help the euro zone’s struggling economy recover from COVID.

FILE PHOTO: Signage is seen outside the entrance of the London Stock Exchange in London, Britain. Aug 23, 2018. REUTERS/Peter Nicholls

The STOXX index of 600 leading European shares gained 1% to 458.52 points, within striking distance of its lifetime high of 461.38 points reached last week.

Wall Street was also set for a steady start with S&P 500 futures up 0.14%, while Dow e-minis gained 0.1%. Nasdaq 100 e-minis were up 0.15%.

A new batch of earnings reports includes chip giant Intel, and before the open the latest U.S. jobless claims numbers at 1230 GMT are expected to reflect rampant worker shortages.

The ECB said that long periods of low inflation would require “especially forceful or persistent” policy support, a hint that stimulus might be kept in place for longer than many had predicted.

“The forward guidance is a bit more dovish and allows more easy policy,” said Piet Haines Christiansen, chief strategist at Danske Bank.

A revived appetite for riskier assets came as worries eased that the Delta variant of COVID-19 would seriously crimp economic recovery, helping to lift crude oil prices.

But Stephen Gallo, strategist at BMO Capital Markets, said that despite expectations of a dovish ECB, the more important issue for markets was the U.S. Federal Reserve and whether the spike in U.S. inflation was indeed transitory.

“The Delta variant has hit risk appetite, it’s summer markets and we saw some positioning squeezes on long-growth, short-Treasuries. All those have been factors,” Gallo said.

“But there are lots of investors out there who want to see whether inflation has crested in the U.S., and when they see that they can relax about the taper timeline. Until then it will be a drag on risk.”

ECB President Christine Lagarde holds a news conference at 1230 GMT, with investors scrutinising her guidance on inflation as the debate over when huge pandemic-era stimulus should be reined back continues among central bankers in Europe and the United States.

“The markets are caught in a bit of pincer movement between concerns about higher inflation and lower growth and that will continue,” said Michael Hewson, chief markets analyst at CMC Markets.

Graphic: Inflation at ECB target:


Oil rose, extending strong gains made in the previous sessions on expectations of tighter supplies until the end of the year as economies recovery from the pandemic.

Brent crude futures gained 0.9% to $72.90 a barrel. [O/R]

The MSCI All Country equity index was up 0.33% at 722.19 points, close to its lifetime high of 728.77 from last week.

The dollar index sat at 92.821, off Wednesday’s three-month peak of 93.194, and the euro was down 0.12%. The safe-haven yen nursed small losses across the board.

Rates markets idled in Asia, with trade thinned by Tokyo’s holiday, leaving the yield on benchmark 10-year U.S. Treasuries at 1.2933%. [US/]

Gold eased 0.4% to $1,799 an ounce as appetite for safer assets weakened.

Cryptocurrencies were firm after bouncing from lows when Tesla boss Elon Musk said the carmaker would likely restart accepting bitcoin payments after due diligence on its energy use.

Bitcoin was off 0.9% at $31,853.

In Asia, the MSCI’s broadest index of Asia-Pacific shares outside Japan was last up 1.3%, its largest daily jump since late May, with markets green from Seoul to Sydney.

Japanese markets were closed for a holiday.

Graphic: Dollar strength:

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