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 Benchmark 10-year yields on Italian, Spanish and Irish government
bonds all plunged to their lowest ever in early trading on Friday,
with the Irish yield almost 10 basis points below comparable U.S.
borrowing costs.
Stock markets, following Wall Street's march to yet another record
peak on Thursday, rose too, with bank shares leading the way and
putting the pan-European index of Europe's leading 300 shares on
track for its eighth consecutive weekly gain.
There was less movement in currency markets, which had swung
violently on Thursday after the ECB cut interest rates - including
deposit rates for banks below zero - and unleashed hundreds of
billions more euros of cheap funds for banks.
"The ECB decisions were largely in line with what the market was
expecting, however the negative deposit rate is certainly a brave
move and hinting that QE (quantitative easing) is a possibility if
necessary should be very welcome news," said Mark Ward, head of
execution trading at Sanlam Securities.
The ECB refrained from pursuing outright bond-buying like the U.S.,
Japanese and British central banks have done in recent years. But
its president Mario Draghi did not rule it out in the future, saying
"we aren't finished here".
At 0850 GMT the FTSEurofirst 300 was up 0.1 percent at 1,382 points,
with financials up 0.4 percent.
Germany's DAX was also up 0.1 percent at 9954 points. On Thursday,
it broke above the 10,000 points barrier for the first time ever.
Britain's FTSE 100 was up a quarter of one percent at 6,830 points,
and France's CAC 40 was flat on the day at 4,545 points, with luxury
goods giant LVMH among the biggest losers, down 1.5 percent.
US JOBS UP NEXT
Investors' risk-taking appetite and hunt for yield was most evident
in European peripheral bond markets, where yields fell to their
lowest on record.
Italian 10-year bond yields fell 8 basis points to 2.87 percent,
Spanish equivalents were down 7 bps at 2.76 percent and Irish yields
fell 7 bps to 2.51 percent.
"The real consensus coming out of the ECB meeting is that these
measures will be supportive of the (European) periphery," said Anton
Heese, co-head of European interest rates strategy at Morgan
Stanley.
"This should be filtering through into lower funding costs in the
periphery."
The yield on 10-year German bonds, the benchmark for euro zone
borrowing, also fell, dipping a few basis points to 1.33 percent.
Analysts at SocGen said this reflected concerns that the ECB's
measures to fight off deflation may not succeed. They also pointed
to the euro's sharp rally well above $1.36 from the four-month low
around $1.35 immediately after Draghi's statement and press
conference on Thursday.
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The euro was little changed on the day in early trading on Friday
around $1.3650, with traders saying major moves were unlikely as
billions of dollars of options at $1.36 and $1.3650 expire later in
the day, and ahead of the U.S. jobs data.
The dollar was flat against a basket of currencies at 90.375.
Traders hunkered down ahead of the May non-farm payroll report, with
the median forecast showing that the U.S. economy added a solid
218,000 jobs last month. Estimates range from as little as 110,000
to as high as 325,000. [ECONUS]
Earlier in Asia MSCI's broadest index of Asia-Pacific shares outside
Japan rose 0.25 percent and Japan's Nikkei closed flat at 15,077.
Wall Street had notched up new records with the Dow up 0.59 percent
and the S&P 500 0.65 percent, while the Nasdaq managed a 1.05
percent gain.
Yields on two-year U.S. Treasury notes were at 0.38 percent after
dipping 2 basis points on Thursday, while those on 10-year paper
fell a tick to 2.58 percent.
Gold was up at $1,254.80 having enjoyed its biggest gain in three
weeks overnight as buyers were encouraged by the prospect of
yet-lower rates for longer in the euro zone.
Oil prices were mixed, with U.S. crude down 8 cents at $102.40,
while Brent crude rose 15 cents to $108.94.
(Reporting by Jamie McGeever, additional reporting by John Geddie in
London and Alistair Smout in Edinburgh; Editing by Catherine Evans;
To read Reuters Global Investing Blog click on http://blogs.reuters.com/globalinvesting;
for the MacroScope Blog click on http://blogs.reuters.com/macroscope;
for Hedge Fund Blog Hub click on http://blogs.reuters.com/hedgehub)
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