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 European shares, oil and other growth sensitive commodities all
leapt as China's move to cut rates to 5.6 percent gave markets a
welcome lift after a week where data has shown its giant economy
heading for its worst year in almost quarter of a century.
It came as ECB head Draghi spoke in Frankfurt of his determination
to use more aggressive measures such as large scale asset purchases
-longhand for money printing- to ensure the euro zone did not slump
into a new crisis.
"We will continue to meet our responsibility - we will do what we
must to raise inflation and inflation expectations as fast as
possible," Draghi said in a heavyweight speech.
"If on its current trajectory our policy is not effective enough to
achieve this ... we would step up the pressure and broaden even more
the channels through which we intervene."
Both the euro zone and China have been lagging the momentum of the
United States, stimulus-driven Japan and faster-growing Britain over
the last month, but a ramping up of the ECB's rhetoric and Beijing's
actions will stoke hopes of a turnaround.
Germany's DAX , France's CAC and pan-regional Euro STOXX 50 were all
up between 0.8 and 1 percent by 1230 GMT, leaving them on course for
weekly gains of 4.5 percent, 2 percent and 2.4 percent respectively.
"The two together, (China cut, Draghi speech) suggest to me there is
still a lot of hard policy work to be done next year," said Neil
Williams, chief economist at fund manager Hermes in London.
Beijing's move also carried a hint of an escalating currency tussle
in Asia.
A sharp fall in the yen <JPY=> this year as Tokyo has introduced
wave after wave of stimulus, has been putting the squeeze on China's
exporters due to a loss of cost advantage.
Japanese Finance Minister Taro Aso said on Friday that the yen's
fall over the past week had been "too rapid". It was one of the
strongest warnings against a weak yen since the aggressive stimulus
efforts began two years ago and saw the currency leap off a 7-year
low to 117.98
OIL SURGE
Currency markets everywhere were shaken into life by China's move
and the signals coming out of Frankfurt.
The euro fell sharply, slicing its way back down through $1.25 to
$1.2430, while 10-year Italian government bond yields, which have
been one of the biggest beneficiaries since Draghi took charge of
the ECB in 2011, hit a new all-time low.
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Hopes that China's growth will now quicken provided a shot in the
arm for the Australian dollar often used as a more liquid
proxy for Chinese investments, and likewise lifted other key
commodity currencies.
The rate cut also added to a positive mood among oil traders, many
of whom expect the Organization of the Petroleum Exporting Countries
to trim production, at what looks to be a landmark meeting in Vienna
on Nov. 27.
Oil jumped 2 percent, or $1.75 to $81.07 a barrel as it surged
towards its first weekly rise since mid-September in its biggest
daily rise in a month.
ALL RISE
Global investor sentiment was also underpinned by record finishes by
the Dow Jones industrial average <.DJI> and S&P 500 on Thursday
after a spate of upbeat U.S. data that offset the recent signs of
spreading weakness in China and Europe.
Wall Street was expected to add a further 0.6 percent when trading
resumes with the day's upbeat sentiment expected to more than make
up for a lack major data.
In emerging markets, Russia's rouble, which is closely tied to the
fortunes of oil, was heading for its first weekly rise since early
September as the pressure it has been under eased.
Copper and gold also got a lift, with the red metal up 1 percent and
spot gold climbing to $1,197 an ounce as traders cheered the
prospect of more global stimulus.
"Commodity prices have risen across the board," said Carsten
Fritsch, senior oil and commodities analyst at Commerzbank. There is
hope that this step (lower Chinese interest rates) will lift
commodities demand."
(Additional reporting by Shanghai newsroom; Editing by Toby Chopra)
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