Thursday, September 06 11:55:16
Euro zone equities rose to two-week highs today, with investors looking to the ECB to support risk appetite by detailing plans for a new bond-buying programme to help bring down borrowing costs for Spain and Italy.
The onus is on ECB President Mario Draghi to back up his promise "to do whatever it takes" to preserve the euro at a 1230 GMT news conference following the bank's monthly meeting.
Investors are looking for clues on the likely size and timing of the bond programme, on any specific cap on yields - seen as unlikely - and on whether the ECB will insist on a preferential, more senior status compared to the other bond holders in case of a default.
"Draghi has made it clear that he is going to do whatever it takes," said Nancy Curtin, chief investment officer at Close Brothers Asset Management. "The reason markets are rallying is (that) it moves us back into a muddle-through scenario ... It removes the Armageddon risk from the break up of the euro zone but it doesn't completely solve the euro zone's problems."
The EuroSTOXX 50 index of euro zone blue chips was up 1.1 percent at 2,469.50 points at 1006 GMT, after rising as high as 2,478.85, its strongest since Aug. 22. The broader, pan-European FTSEurofirst 300 added 0.8 percent at 1,083.97 points, recovering from a one-month intra-day low of 1,074.05 points set on Wednesday.
Anticipation that ECB action might in time boost the region's struggling economy aided commodity prices and helped miners to perform strongly, with Antofagasta, Randgold Resources and Norsk Hydro among top gainers. Gold miners are a top pick for Curtin at Close Brothers, who for now remains more cautious about equities as a whole. "We might look to perhaps increase our equity weighting into the year end," she said. "If all this liquidity does come through, if there are some signs of perkier economic activity, and if there is a setback in markets, this could set up an interesting rally for the year end." (C ) Reuters