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 World stocks recorded their biggest rise in a month and Asian
stocks their best day in three months. Oil rallied around 5 percent
for the second day in a row, recovering from 12-year lows to above
$30 a barrel.
The surge comes a day after ECB President Mario Draghi signalled the
central bank would ease policy further at its next meeting, in March
to combat fading growth and disinflation, a message he reiterated at
the World Economic Forum in Davos on Friday.
European stocks followed Asia's lead. The region's main indices rose
around 2 percent for the second consecutive day. Remarkably, given
the recent steep declines, some were on track for their best weekly
performance in two months.
Investors seized on Draghi's comments and bet that the Bank of Japan
might also ease policy further next week and that the Federal
Reserve will go slow in raising U.S. rates this year.
"With inflation so low, it would be strange if central banks didn't
do more in the face of such market turmoil and elevated risk
factors," said John Reid, strategist at Deutsche Bank in London.
"It won't be a major growth stimulant, but any extra liquidity
provided will have to go somewhere, so it's too early to say the
central bank era of elevating asset prices is over," he said.
In early trade on Friday the FTSEuroFirst 300 index of leading
European shares was up 2.2 percent <.FTEU3>, putting it on track for
a weekly gain of around 2 percent.
Germany's DAX <.GDAXI> was up 2 percent and headed for a weekly rise
of 2.2 percent. Britain's FTSE 100 <.FTSE> was up 1.8 percent on the
day and France's CAC 40 <.FCHI> was up 2.5 percent.
Earlier this week, all of them had entered "bear market" territory,
meaning they were down 20 percent or more from last year's peaks.
MSCI's broadest index of Asia-Pacific shares outside Japan
<.MIAPJ0000PUS> rose 2.4 percent on Friday, the most since Oct. 7
last year, after touching a four-year low on Thursday.
That puts the index on track for a 0.2 percent gain for a week in
which oil prices plunged and concern over China's economy pummelled
risk assets globally.
Japan's Nikkei <.N225> surged 5.9 percent at the close, the most in
more than four months. Chinese stocks <.SSEC>, which had fallen
almost 20 percent since the turn of the year, rose 1.3 percent.
EURO UNDER PRESSURE
Oil prices extended an overnight rally that began after data showed
stockpiles at some U.S. sites rose less than some had expected and
as cold U.S. and European weather spurred demand.
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That gave traders the incentive to cover record short positions in
oil, essentially bets that the price of oil would continue falling.
[O/R]
In early London trade, Brent crude futures were up 5.3 percent at
$30.80 a barrel <LCOc1>, extending its rebound from a 12-year low of
$27.10 hit on Wednesday.
U.S. crude futures followed a similar path, rising 4.5 percent to
$30.80 as well <CLc1> from Wednesday's 12-year low of $26.19.
Other commodities also gained. Three-month copper on the London
Metal Exchange <CMCU3> rose 0.4 percent to $4,450 a tonne, poised
for a 2.7 percent weekly rise, its best week in more than three
months. [MET/L]
In currencies, the prospect of looser ECB policy kept the euro under
pressure. The single currency was down 0.4 percent at $1.0832
<EUR=>.
Currency analysts at Goldman Sachs lowered their euro forecasts late
on Thursday, in a note that predicted the currency would fall below
parity with the dollar and end the year at $0.95.
"In our view there will be more easing for longer than the market
expects," the analysts wrote. "This is the underlying reason why we
think the euro's downtrend will continue and be large.
"We are keeping our end-2017 forecast unchanged at $0.90 at present,
though we see downside risks to that."
The dollar was up 0.3 percent against the yen at 118.03 yen <JPY=>,
pulling away from a one-year trough of 115.97 struck earlier this
week against the safe-haven Japanese currency.
U.S. Treasuries prices fell. Benchmark yields rose from 3 1/2-month
lows as the rebound in stocks and oil scaled back appetite for
low-risk government debt.
The 10-year yield rose 3 basis points to 2.05 percent <US10YT=RR>,
and the yield curve - the gap between two- and 10-year yields -
steepened from a multi-year low to around 119 basis points
<US10YT=RR> <US2YT=RR>.
(Reporting by Jamie McGeever; Editing by Larry King)
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