U.S. Indexes Rack Up the Records After ECB as Euro, Bonds Slide

  • Italian bond yields surge after April tapering announced
  • Asian index futures tip further gains amid yen’s retreat

ECB's Draghi: Euro-Area Growth Remains Tilted to Downside

U.S. stock benchmarks set new records, rising amid a renewed selloff in bonds after Mario Draghi signaled he will bolster stimulus in the euro area if a proposed reduction in the current level of asset purchases fails to shore up the economy.

The European Central Bank’s pledge to cut bond buying, while extending quantitative easing until the end of 2017, initially propelled gains in the euro. The common currency reversed its climb after President Draghi kept the option open to add to asset purchases. The S&P 500 Index tracked gains in European stocks as emerging-market equities also rallied. Treasuries slipped with sovereign debt across Europe, while oil rose above $50 a barrel in New York.

The ECB fueled gains in an equity market still trading off the boost provided by Donald Trump’s election as U.S. president. The S&P 500 is breaking records with the Dow Jones Industrial Average amid speculation Trump will boost fiscal spending, shoring up growth in the world’s largest economy. The attention now shifts to the Federal Reserve, with traders all but convinced policy makers will end the year with an interest-rate hike. The debt market, meanwhile, has been the chief casualty of Trump exuberance, with about $2 trillion rotated out of bonds and into equities since his victory.

The ECB has “left themselves a degree of wiggle room between now and the end of March to say that if conditions are sufficient” they will maintain the current stimulus, said Jeremy Stretch, head of Group-of-10 foreign-exchange strategy at Canadian Imperial Bank of Commerce in London. “There was clearly a degree of surprise in terms of the reference” to the cut from April, he said.

Stocks

  • The S&P 500 Index climbed 0.2 percent to 2,246.19 as of 4 p.m. in New York, reaching a new peak and swelling its post-election rally to more than 5 percent. The Dow Average added 65 points to a record 19,614.81, its seventh gain in eight days.
  • Financials shares and commodity producers led gains Thursday, with both groups rising at least 0.7 percent, while utilities slipped as the increase in Treasury yields damped demand for their payouts.
  • The Stoxx Europe 600 Index added 1.2 percent for a fourth day of gains that took the measure to a one-month high. Banks and resource producers led gains.
  • Emerging-market equities climbed 1.3 percent in a fourth straight advance.
  • Asian index futures signaled further gains, as contracts on the Nikkei 225 Stock Average climbed at least 0.2 percent with futures on benchmarks in Australia, Hong Kong and South Korea.

Bonds

  • Yields on Treasuries due in a decade rose by seven basis points, or 0.07 percentage point, to 2.41 percent after falling almost six basis points in the prior two days.
  • Italian sovereign debt securities due in a decade tumbled, sending the nation’s 10-year bond yield up by 11 basis points.

Commodities

  • West Texas Intermediate crude jumped 2.2 percent to $50.84 a barrel, with investors pivoting to prospects for the OPEC-led output deal despite a surge in U.S. stockpiles.
  • The Organization of Petroleum Exporting Countries has invited 14 producers from outside the group to discuss further curbs at a meeting in Vienna on Saturday.
  • “The market seems to be optimistic about this weekend’s meeting and about OPEC’s compliance with its agreement to cut output,” said Rob Haworth, a senior investment strategist in Seattle at U.S. Bank Wealth Management, which oversees $133 billion of assets. “The market has turned positive and price declines will be followed by speculators building and rebuilding positions.”
  • Copper futures retreated 0.6 percent, while gold lost 0.3 percent.

Currencies

  • The euro slumped 1.3 percent to $1.0615, after earlier gaining as much as 1.1 percent.
  • Draghi’s mixed message -- reducing bond buying while extending the current purchase program by three more months than economists had expected -- initially sent investors scattering in different directions as they struggled to digest its implications.
  • The yen dropped 0.2 percent to 114 per dollar, swinging back to losses amid a retreat from haven currencies.
  • The Bloomberg Dollar Spot Index, which tracks the greenback against 10 major peers, advanced 0.5 percent, rising for the second time in four days.
Before it's here, it's on the Bloomberg Terminal.
LEARN MORE