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New York - Global stocks and crude oil rallied on
Thursday on rising hopes Greece will abandon plans to hold a referendum over a
euro-zone bailout and after the European Central Bank cut interest rates in a
surprise move.
The ECB rate cut and a drop in US jobless claims helped feed a
bid for riskier assets. Trading was volatile across asset classes as markets
were rocked by headlines on Greece, comments from the new ECB leader and
economic data.
The Greek government teetered on the brink of collapse, with the
opposition and some government lawmakers demanding a caretaker administration to
force through approval of the bailout, the nation’s only financial lifeline.
ECB President Mario Draghi, who took office on Tuesday, said the
euro zone could enter a “mild recession” toward the end of 2011 following the
bank’s unexpected interest rate cut by a quarter point to 1.25%.
US Treasury debt prices fell on the rate cut and government data
that showed new claims for US unemployment benefits fell below 400,000 last
week for the first time in five weeks, suggesting modest improvement in the
labor market.
The euro traded near breakeven at $1.3751.
“Everybody is totally focused on any sensational headlines from
Europe. The market was sideswiped by the (ECB) cut this morning, and Draghi has
dug the knife in further by indicating Europe is heading to a mild recession,”
said Dean Popplewell, chief FX strategist at Oanda in Toronto.
Popplewell also said that everyone is nervous ahead of the US
employment report for October to be released on Friday.
US stocks also bounced in choppy trade following an industry
report that showed the pace of growth in the vast US services sector slowed
modestly in October to its lowest level since June as new orders declined.
The ECB’s move increased investor appetite as did comments by US
Fed Chairman Ben Bernanke on Wednesday, who tried to soothe market tensions by
promising to do more if necessary to boost the US economy.
MSCI’s all-country world index rose 0.9% and the
FTSEurofirst 300 index of top European shares was up 2.0%.
The Dow Jones industrial average was up 133.05 points, or 1.12%, at 11,969.09. The Standard & Poor’s 500 Index was up 13.30 points,
or 1.07%, at 1,251.20. The Nasdaq Composite Index was up 31.01 points, or
1.17%, at 2,671.00.
“It is a politics-driven market. With the violent intraday moves,
the best way to play it is with very short-term, highly leveraged trackers or
options, but with tight stop-losses,” said David Thebault, head of quantitative
sales trading, at Global Equities.
Financial shares in Europe surged, with AXA up 5.6% and
UniCredit up 4.6%.
Oil prices gained, popping above $110 a barrel.
Brent crude for December was up $1.03 at $110.37 a barrel. US
crude was up $1.40 at $93.91 a barrel.
US Treasuries fell to session lows after the ECB rate cut.
Benchmark 10-year Treasury notes fell 19/32 in price to yield 2.05%.
