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 German stocks powered above 12,000 points for the first time, while
the main pan-euro zone benchmark indices hit new seven-year highs.
The euro rebounded as European trading got underway, however, while
U.S. oil prices recovered after slipping to a fresh six-year low,
although they were still down on the day.
This week's focal point for global financial markets is the U.S.
Federal Reserve's policy decision on Wednesday, with the euro/dollar
exchange rate likely to remain the dominant driver for major equity,
currency and bond markets until then.
"With dollar momentum this strong and investors unlikely to ride any
euro rally ahead of the (Fed) meeting, risks for the euro are still
to the downside for the next couple of days and any bounces are
likely to be limited," Unicredit FX analysts said on Monday.
In early European trading the euro was up 1/3 of a percent against
the dollar at $1.0530 <EUR=>, having slid to $1.0457 early in the
Asian session, its lowest since January 2003.
The euro has lost roughly a quarter of its value versus the dollar
since mid-2014 and suffered its biggest weekly fall since September
2011 last week, shedding 3.2 percent as the European Central Bank
launched its trillion euro money-printing scheme.
Goldman Sachs now sees the euro at $0.80 by the end of 2017.
European stocks took heart. Germany's DAX <.GDAXI> was up 0.85
percent at 12,001 points, France's CAC 40 half a percent higher at
5,039 points, and Britain's FTSE 100 index up 0.25 percent at 6,758
points.
The FTSEurofirst 300 index of top European shares rose 0.3 percent
to 1,584 points and the euro zone top 50 stocks index was up 0.5
percent at a seven-year high of 3,673 points.
ECB IN AGAIN?
MSCI's broadest index of Asia-Pacific shares outside Japan
<.MIAPJ0000PUS> closed a few ticks higher, while Chinese shares
outperformed to hit five-year-highs.
The CSI300 index and the Shanghai Composite Index <.SSEC> both rose
more than 2 percent after Premier Li Keqiang said Beijing had scope
to adjust policies to help boost the world's second largest economy.
Japan's Nikkei hit a 15-year high of 19,349 points.
Recent weak U.S. inflation and retail sales data have not derailed
expectations that the Fed will tighten monetary policy, and the
prospects that higher rates and a stronger dollar will hit U.S.
corporate profits have dragged on shares.
Wall Street futures were seen opening 0.2 percent higher on Monday,
lagging Europe's main bourses.
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Many observers expect the Fed to remove its pledge to remain
"patient" on delivering its first interest rate hike since 2006,
with economists polled by Reuters almost evenly split on whether a
first hike will come in June or later in the year.
German 10-year Bund yields inched up 1 basis point to 0.265 percent,
having hit a record-low 0.188 percent last week. Longer-dated German
yields fell, however, and benchmark Spanish, Italian and Portuguese
yields were also headed back towards their recent record lows.
The ECB is expected to buy more sovereign bonds as part of its
stimulus program this week, limiting any upward pressure on bond
yields.
"The current dynamic is incredible, logical and extendable ... until
something changes, but there is little sign of that right now," Citi
rates strategist Mark Schofield said.
Oil prices continued to tumble, with U.S. crude dropping more than 2
percent at one point to a six-year low on fears of oversupply. The
International Energy Agency said on Friday that a global glut of oil
is growing and U.S. production shows no sign of slowing.
U.S. crude was last down about 0.8 percent at $44.48 a barrel, while
Brent was 0.6 percent lower at $54.32.
After snapping its longest daily losing streak since 1973 on Friday
with a first rise in 10 sessions, gold consolidated its gains.
Bullion was flat on the day at $1,158 an ounce.
(Additional reporting by Lisa Twaronite in Tokyo; 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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