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Global shares rally on ECB QE hopes

Monday, August 25 16:37:57

Global equity markets rallied today, with the U.S. benchmark S and P topping the 2,000 mark for the first time, as expectations grew that the ECB would loosen its monetary policy in a move to boost economic growth.

The euro fell to near a one-year low against the dollar and yields on euro zone government debt fell to historic lows as investors took the view that ECB President Mario Draghi was prepared to use all available tools to foster growth.

In a landmark address to central bankers on Friday in Jackson Hole, Wyoming, Draghi suggested a major shift in ECB policy toward reviving growth and not focusing on austerity.

Speculation grew that the ECB was preparing a program of asset purchases to counter wilting inflation when it meets next week, driving yields on bonds from Germany, France, Italy, Spain, Portugal, Ireland and elsewhere to all-time lows.

European stocks rallied, and Wall Street followed, with the S and P surging to above 2,000 for the first time.

"European investors came in today with the mindset that we're going to have a more supportive fiscal and monetary policy stimulus, and therefore we ought to see better times ahead in terms of economic growth and corporate earnings," said Phil Orlando, chief equity market strategist at Federated Investors, in New York. "Europe is essentially driving the U.S.," he said.

The Dow Jones industrial average was up 121.37 points, or 0.71 percent, at 17,122.59. The Standard and Poor's 500 Index was up 13.34 points, or 0.67 percent, at 2,001.74. The Nasdaq Composite Index was up 29.34 points, or 0.65 percent, at 4,567.89.

In Europe, the FTSEurofirst 300 index of top regional shares rose 1.1 percent to close at 1,366.16.

MSCI's all-country world index rose 0.56 percent.

The benchmark 10-year U.S. Treasury note was unchanged, yielding 2.4015 percent. But European debt rallied, with the 10-year German bund hitting a record low of 0.926 percent, before pulling back to yield 0.956 percent.

The dollar rose as the euro dropped on weak German economic data and Draghi's comments.

The euro skidded against the dollar to $1.3184 at one point after news that Germany's Ifo business climate index fell to 106.3 from 108, its lowest since September 2013. The euro was last trading at $1.3199, down 0.32 percent on the day.

Brent crude traded just above $102 a barrel, while ample supply and weak demand dampened prices for U.S. crude. (Reuters)

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