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 World stocks were already testing all-time highs after another jump
in Chinese stocks and a record close on Wall Street, and European
markets shot up after top ECB policymaker Benoit Coeure talked of
adjusting the bank's buying programme.
He said that the speed of the recent spike in bond yields, which has
effectively wiped out the benefits of QE, was worrisome and that the
ECB could "moderately" increase its buying in May and June, and
possibly in September, to ensure it doesn't fall behind on its
target over summer.
That pushed the euro back below $1.12 for the first time in a week
and the FTSEurofirst 300 jumped 1.2 percent as gains of as
much 1.9 and 2 percent on Germany's DAX and in Paris outpaced a 0.4
percent rise on London's FTSE
Bond yields, which move inversely to prices, also tumbled, with
those on 10-year German Bunds down 7 basis points and Italian and
Spanish equivalents down 9 basis points.
"There is a sense the comments from the ECB indicate a growing push
back against the sell-off in bond markets that's been in place for
the past month or so, and a push back against both euro strength and
market volatility," said Manik Narain, a UBS strategist.
The moves were compounded as France's central bank governor
Christian Noyer, also an ECB member, said the bank was "ready to go
further if necessary" with its easing measures, and came amid
another mixed set of European data.
Germany's ZEW sentiment survey deteriorated far more sharply than
expected in May against the backdrop of bumpy financial markets.
A small rise in core euro zone inflation, meanwhile, was offset by
the UK where it turned negative for the first time since the 1960's.
That knocked sterling <GBP=D4> as it fell for a third straight day
against a broadly stronger dollar.
Fears of a Greek bankruptcy also rumbled in the background even as
the country's top politicians vowed to conclude a cash-for-reform
deal with its lenders.
"I think we are very close (to a deal) ... let's say in a week,"
Greek Finance Minister Yanis Varoufakis said in a TV interview on
Monday night. "Another currency is not on our radar, not in our
thoughts," he added.
German Chancellor Angela Merkel and Greek Prime Minister Alexis
Tsipras may meet at a summit in Latvia this week, a German official
told Reuters.
FINE CHINA
Wall Street, which closed at a fresh record high on Monday, was
expected to add to the gains when it reopens later.
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China's surging stock market and a jump in the New Zealand dollar
after a rise in inflation, dominated attention overnight in Asia.
The CSI300 index surged 3.4 percent and the Shanghai Composite Index
rose 3.0 percent, as investors welcomed Beijing's 2015 guidelines
for economic reform.
They prioritised a further opening of the country's capital market
and a restructuring of state enterprises.
"You need a vibrant stock market to push forward economic reforms,
whether it's about asset securitisation or industry consolidation,"
said Tian Weidong, analyst at Kaiyuan Securities in Xian. "With such
a policy backdrop, investors are emboldened to stay in the market."
Japan's Nikkei also ended up 0.7 percent at a three-week high as the
dollar nudged down the yen.
Expectations of more easing from the Bank of Japan kept the Japanese
currency in check. The BOJ meets on Friday and is seen expanding its
massive stimulus programme in October, according to most economists
polled by Reuters.
Among commodities, oil prices sagged for a second day running as the
stronger dollar took its toll alongside oversupply concerns
triggered by a jump in Saudi Arabian exports.
U.S. crude dropped about 0.6 percent in European trade to $59.04 a
barrel, while Brent fell 0.8 percent to $65.75.
Safe-haven gold, meanwhile, fell for the first time in six sessions,
dropping about 0.2 percent to $1,220 an ounce. It had hit a
three-month high a day early after disappointing U.S. economic data
dented expectations of Federal Reserve rate hikes this year.
(Additional reporting by Sujata Rao, Editing by Hugh Lawson)
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