The European Central Bank’s plan to pump out about €1 trillion to revive the eurozone economy kept stocks in the region on track for their best week since 2011 but knocked the shared currency to fresh 11-year lows.
Wall Street, which rallied 1.5 per cent on Thursday’s European bond-buying announcement, was off because of soft corporate earnings. US Treasury debt prices jumped as European yields touched record lows and left America’s higher interest rates still more attractive to investors.
Oil prices rose on hopes for a boost to global growth from the ECB’s move, while the death of Saudi Arabia’s King Abdullah added to uncertainty over the plans of the world’s biggest crude exporter.
The appetite for riskier assets was intense with traders also driving Italian, Spanish and many other eurozone bond yields to new record lows.
“What the market is focussing on is the potentially open-ended element of the (ECB QE) programme,” said Emile Cardon, the eurozone strategist at Rabobank.
Led by Greek shares, stocks in Europe were set for their biggest weekly gain in over three years. The ECB’s bond-buying scheme helped Greece’s ATG share index rise more than 6 per cent.
The FTSEurofirst 300 index of top European shares was last up 1.4 per cent at 1,473.94 points after touching a new seven-year high.
Germany’s DAX and Paris’s CAC 40 were last ahead over one per cent.
There were nerves about cliff-hanger elections in Greece on Sunday that polls suggest will be won by the anti-EU/IMF bailout Syriza party.
But the ECB’s pledge to buy roughly €50 billion of government bonds a month from March until September 2016 more than compensated.
US stocks declined, partly on worries the surging dollar will hurt US corporate earnings.
The Dow Jones industrial average fell 88.24 points, or 0.5 per cent, to 17,725.74, the S&P 500 gave up 9.9 points, or 0.48 per cent, to 2,053.25, and the Nasdaq Composite lost 11.79 points, or 0.25 per cent, to 4,738.61.
United Parcel Service Inc shares fell nearly 10 per cent after the delivery giant gave a fourth-quarter earnings outlook below expectations.
The euro went into another nosedive and crashed through $1.13, $1.12 and all the way to $1.1115 in a matter of hours, in its biggest daily fall in over three years. The euro did recover some and was last off nearly 1 per cent at $1.1267.
“We are in a period of severe stress in terms of position liquidation. Where this stops, it is impossible to tell,” said Derek Halpenny and Bank of Tokyo Mitsubishi.
Long-dated bonds led a US debt rally and the yield curve flattened. Benchmark 10-year notes gained 22/32 in price to yield 1.82 per cent, far higher than comparable German debt yields that fell to record lows of 0.312 per cent yesterday.