The US dollar strengthened against the euro and Japanese yen yesterday after the European Central Bank signalled it could deliver fresh monetary stimulus next month, while global equity markets eased after hitting record peaks this week.
Lower-rated eurozone bonds rallied after ECB President Mario Draghi gave his clearest signal yet that policy-makers might act in June to stem slowing inflation and bolster a fragile economic recovery in the single currency bloc.
Italian, Spanish and Irish borrowing costs fell to record lows after the ECB raised the prospect that it could embark on an asset purchase programme if inflation remained persistently low.
Spain and Italy, which two years ago were at the forefront of the eurozone debt crisis, badly need the recovery to gain traction to curb high debt levels.
Yields on Italian and Spanish 10-year bonds hit record lows of 2.90 per cent and 2.87 per cent respectively, before paring those gains as investors squared off positions into the weekend.
Irish 10-year bonds dropped to lows of 2.65 per cent , below the equivalent borrowing costs of the UK, which contributed significantly to its bailout four years ago.
The euro fell 0.52 per cent to 1.3768 against the dollar. The dollar basket rose 0.58 per cent and the dollar gained 0.12 per cent against the yen to 101.77.
A measure of global equity performance, MSCI’s all-country world index, fell 0.27 per cent after advancing to its highest since November 2007 on Thursday.
In Europe, the pan-European FTSEurofirst 300 index slipped 0.26 per cent to close at 1,355.40, after hitting its highest level since May 2008 on Thursday.
On Wall Street, the major stock indices rebounded, but still traded near their level at the beginning of the year.
The benchmark S&P 500 is up a bit more than one per cent for the year, and has traded within a rough 35-point range for two months.
The Dow Jones Industrial average rose 27.43 points, or 0.17 per cent, to 16,578.4.
The S&P 500 gained 1.04 points, or 0.06 per cent, to 1,876.67 and the Nasdaq Composite added 11.183 points, or 0.28 per cent, to 4,062.678.
A rebound in so-called momentum growth stocks, such as Google Inc, Priceline Group and Twitter Inc , led the advance.
Brent crude gave up initial gains as investors worried that the spreading conflict in Ukraine could disrupt supply from Russia, the world’s top oil producer.
Brent crude for June rose 2 cents to $108.06 a barrel. U.S. oil was down four cents at $100.22.
US Treasuries drifted lower as the 30-year long bond again surrendered price gains following an unexpectedly costly $16 billion government auction of new 30-year debt.