European stocks rise as ECB extends helping hand

AFP

European stock markets rose on Thursday after the European Central Bank extended its massive bond-buying programme, signalling that the eurozone”s fragile economy can count on its continued support.
European bonds also firmed on the prospect of further ECB asset purchases, while the euro slipped against the dollar in very volatile trading. The ECB”s announcement that it will scale down the size of its purchases starting in April wrong-footed markets, but investors quickly snapped out of their surprise. “The ECB”s liquidity sink is still filling up,” observed Neil Williams, chief economist at Hermes Investment Management. Even at reduced levels of bond-buying, the ECB “is still looking to inject an extra 540 billion euros”, he said. ECB chief Mario Draghi said that the bank had not discussed actually “tapering”, or winding down, asset purchases, but some analysts said further assurances were needed.
“With concerns still elevated over the health of the European economy and mounting political instability from Italy weighing heavily on sentiment, investors may turn to Draghi for further clarity on why the ECB made such a move,” said Lukman Otunuga at FXTM Analysis.

“Taper with twist”
“The ECB has delivered a taper with a twist,” said Craig Erlam at Oanda. “The
number of purchases has been reduced but the expiry has been pushed back to December, rather than September which is what was expected.”
Global stocks have rallied this week, propelling the Dow on Wall Street to successive records — and put it on course to hit 20,000 for the first time — while the S&P 500 also clocked up an all-time high Wednesday.
On Thursday the Dow was a touch firmer in early New York business. Tokyo ended 1.5 percent higher, while Seoul surged two percent and Sydney, Taipei and Manila piled on more than one percent. Shanghai though dipped 0.2 percent despite Chinese trade data showing a forecast-beating jump in imports and exports that indicate the world”s number-two economy continues to stabilise.
Japanese traders meanwhile brushed off data showing the world”s number-three economy grew slower than initially thought, with the government offering a glimmer of hope by revising up its forecasts for the first and second quarters of 2017.
Oil prices rebounded after losses triggered by concerns over OPEC”s ability to implement an output cut agreed last week.
“Market sentiment seems to have reversed as participants question how meaningful the deal is and whether producers will actually stick to proposed cuts,” said Alex Furber, a trader with CMC Markets. Many economists had also predicted the ECB would increase the share of bonds it could buy to as much as 50 percent. Most issue and issuer limits are set at 33 percent. Draghi cited “an increasing awareness of legal and institutional constraints” for not taking that step.
He reiterated his call for governments to implement structural reforms that can cement the recovery, saying that political concerns are no excuse. Germany, France and the Netherlands all have elections in 2017,.