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Global markets: Europe jumps on Swiss move

New York - Switzerland's move to jettison a three-year-old cap on the franc threw global markets into turmoil on Thursday, sending the currency and most European shares soaring while bond yields and Swiss equities tumbled.

The franc jumped almost 30% in the chaotic minutes after the Swiss National Bank stunned markets by removing the 1.20-per-euro cap that was created in 2011 to avert deflation at the height of the eurozone crisis.

The Swiss currency surged as high as 0.8052 francs per euro before paring some gains to trade 15% higher at 1.02020. The sharp moves in financial markets shattered any hopes investors had that recent volatility might ease.

Switzerland's main share index fell 8.7% in its biggest single-day sell-off by percentage in 25 years, wiping about $100bn of market value off Swiss companies.

But major European stock indexes rose 2% or more on the prospect the European Central Bank was close to new stimulus, and shares in emerging markets also rose.

Some traders said Swiss officials must have expected a tide of euros from the ECB through stimulus known as quantitative easing, or QE, which is seen as positive for European stocks.

"The reason you're seeing Europe up so much, they're basically doing it on the premise of significant euro depreciation as a follow-on for QE," said Dan Morris, global investment strategist at TIAA-Cref, which has about $600bn under management.

High volatility across all asset prices is the main characteristic of the current marketplace, Morris said.

"We're going to see this continued high volatility in equities, in fixed income and in currencies," Morris said. "What's driving that, you got monetary policy out of sync globally. US going one way, ECB going another, Swiss going another, Sweden going another," he said.

MSCI's all-country stock index, a measure of stock performance in 45 countries, rose 0.24%. The pan-European FTSEurofirst 300 index of leading regional shares rose 2.88% to close at 1,393.41. The Euro STOXX 50 Index of European blue chips rose 2.2%.

On Wall Street, the Dow Jones industrial average fell 29.28 points, or 0.17%, to 17 397.81. The S&P 500 slid 8.36 points, or 0.42%, to 2 002.91 and the Nasdaq Composite lost 44.27 points, or 0.95%, to 4 595.05.

Gold rose as much as 3% to a 4-month high after the shock Swiss move. US gold futures for delivery in February rose 2.5% to settle at $1 264.80 an ounce.

All Swiss government bill rates and bond yields out to nine- year maturities traded below zero after the central bank scrapped the exchange rate cap and lowered interest rates to a negative 0.75%.

German 10-year yields reversed an earlier rise to hit new lows, while French and Belgian bonds underperformed their eurozone peers as the two countries were considered the main targets for Swiss central bank investment in the eurozone.

Yields on US 30-year Treasuries struck a record low for a second straight session, and the benchmark 10-year bond rose 19/32 in price to push its yield down to 1.7699%.

The dollar plummeted to 0.736 francs, the lowest since 2011, before paring losses. Broader concerns about the euro sent it to its weakest in 11 years against the dollar , down 1.5% to $1.1612, while the greenback was last down 0.74% against the safe-haven Japanese yen at ¥116.45 yen.

Oil prices dropped after breaking above $50 a barrel, as a falling dollar was followed by weak US economic data. The Philadelphia Federal Reserve Bank released a survey saying factory activity in the US mid-Atlantic region grew at a slower pace in January.

Global benchmark Brent fell $1.02 to settle at $47.67 a barrel a barrel. US crude settled down $2.23 to trade at $46.25 a barrel.

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