Asian and European stock markets all moved higher Friday, betting that the stimulus package announced by the European Central Bank Thursday will lift growth both in the eurozone and further afield, and betting on more good news from the US labor market when May payrolls data are announced later Friday.
Bond markets in Europe rose particularly sharply, with yields on 10-year Italian and Spanish government bonds falling to their lowest ever levels in early trade. Both yields are now clearly below 3%, having been over 7% at the height of the euro crisis in 2012. Long-term borrowing costs for the French, Dutch and German governments also fell investors moved money out of short-term accounts that will now pay them even less than before.
The Euro Stoxx 600 index hit a new six-year high and was up 0.4% to stand at 346.26 by 0650 EDT. Germany’s DAX index was up by less at 9,974.57, having hit 10,000 for the first time ever in reaction to the ECB’s action on Thursday. The benchmark Italian and Spanish stock indexes were up 0.7% and 1.2% respectively, reflecting expectations that those two countries would benefit most from the range of measures unveiled by ECB President Mario Draghi.
However, the euro was little changed against the dollar, in a sign that, whatever else Draghi may have done to bolster financial asset prices, there’ll be no immediate decline in the exchange rate to gladden the eurozone’s exporters.
“It isn’t clear whether the measures taken today will remove the risk of goods price deflation, boost credit creation, or do much to weaken the euro. But they will probably boost asset prices further,” analysts at Societe Generale said in a research note.
Earlier, Asian markets had also reacted favorably, the Asia Dow index rising 0.25% to its highest level this year.
Markets have been lifted this week by optimism that the US economy will pick up momentum in the second quarter. Those hopes will be tested later today when the Labor Department releases its employment report for May. According to Reuters, analysts expect the figures to show that the economy added 218,000 jobs last month.
According to figures released yesterday, new jobless claims rose slightly last week but were still close to their lowest level in seven years.
