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 European shares, which had their best day in a month on Friday after
the People's Bank of China cut interest rates, edged higher still
after sources told Reuters Beijing was ready to ease policy further
to head off slowing inflation.
European Central Bank chief Mario Draghi also looked to be clearing
the way for the full-scale government bond buying hoped-for by
investors but opposed by Germany's Bundesbank.
On Monday, ECB governing council member Ewald Nowotny underscored
the reservations that still exist in corners of the 18-country euro
zone about such a move, however.
Also potentially complicating the policy picture, the Ifo survey
gave a more upbeat reading of German business sentiment than some
other recent data. That bodes well for growth.
Jean-Louis Cussac, the head of Paris-based firm Perceval Finance,
said the market was currently driven by central banks.
"Fund managers have not been selling equities during the recent
pull-backs because of the 'ECB put': if the situation worsens, the
central bank is ready to take further steps," he said. "The market
remains volatile, and investors should be cautious."
Shares in Shanghai rose almost 2 percent, while MSCI's broadest
index of Asia-Pacific shares outside Japan jumped 1.1 percent. Tokyo
was closed for a holiday.
European markets were slightly less bullish overall, German and
French stock indices rising 0.8-0.9 percent while London fell by
less than 0.1 percent. Futures pointed to rises of 0.1-0.2 percent
on Wall Street ahead of the opening.
"The markets are continuing to react to the Chinese rate cut on
Friday and to Draghi's comments," said Jeremy Batstone-Carr, head of
private client research at London-based investment manager Charles
Stanley.
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"Confronted by debt mountains that can’t be reduced by growth,
Draghi and other central bankers are now targeting inflation. The
financial markets are viewing the possibility favourably but my fear
is that central banks’ dread of a debt deflationary spiral is
insufficient to do much about it."
In commodity markets, oil edged down ahead of a key meeting of OPEC
on Thursday amid uncertainty on whether producers would agree on a
meaningful cut in output to support prices. Brent fell 13 cents at
$80.24 a barrel, while U.S. crude 9 cents to $76.42.
Gold was steady around $1,200 an ounce, as traders cheered the
prospect of more global stimulus.
The euro, driven by Draghi's comments on Friday to the verge of this
month's more than two-year lows, was a touch higher on the day at
$1.2405.
(Editing by Catherine Evans)
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