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ECB policymakers have opened the door to a rate
cut, effectively charging banks to hold cash at the central bank
overnight, and to a refinancing operation aimed at supporting
businesses when its board meets on June 5.
Expectations of lower rates pushed German yields at the lowest
levels in a year and on course to record a fifth consecutive
month of declines.
The MSCI World Index, which tracks stocks from developed
economies and has gained 1.4 percent since the last ECB policy
meeting, was up 0.1 percent, a whisker away from an all-time
high set on Wednesday.
The euro, which had fallen around 2 percent against the dollar
over the same period, consolidated just above a three-month low
of $1.3584.
"At least a rate cut is in the price (of the euro and stocks),"
said Joost van Leenders, investment specialist for allocation
and strategy at BNP-Paribas Investment Partners.
"I think markets expect a bit more, something directed at bank
lending, such as purchases of asset-backed securities, and I
don't think that is fully discounted."
Of 48 economists polled by Reuters this week 31 said the
expected combination of a cut in the ECB's deposit rate below
zero and new long-term cash for banks to lend on to small and
medium-sized firms would help boost lending in the euro zone.
European shares held firm near multi-year highs, with the
pan-European FTSEurofirst 300 index hovering close to a near
six-year peak reached earlier this week.
U.S. futures pointed to a slightly higher open on Wall Street.
"The trend is up, the trend's your friend, but I wouldn't buy up
at these levels," said Darren Courtney-Cook, head of trading at
Central Markets Investment Management.
Gold extended losses to a third straight session to fresh
16-week lows, reflecting recent gains in the dollar and weak
physical demand in top buyer China also weighed.
Brent crude rose back above $110 a barrel on signs of stronger
demand from top oil consumer the United States, with a sharp
drop in its gasoline stocks adding to recent data showing a
strengthening economy.
(Additional reporting by Sudip Kar-Gupta; Editing by Toby
Chopra)
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