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Earnings boost stocks, euro retreats as ECB meets

Dubai - Stocks rose on Wednesday on earnings strength, with the S&P 500 Index and Nasdaq Composite Index adding to Tuesday’s record highs.

The euro retraced some recent gains as European policy makers gathered in Frankfurt before Thursday’s rate decision. Oil fluctuated.

It was a day of reversing trends in Europe, with the common currency coming off the highest close since August 2015 as investors weighed the European Central Bank’s (ECB) plans for stimulus measures and the possibility of a change of tone when the decision is announced.

The dollar steadied after the  implosion of the US health-care reform bill sent it to the lowest since September a day earlier. The Stoxx Europe 600 Index advanced following its largest drop this month. Electrolux and ASML were among gainers after reporting earnings.

Investors will be closely watching Europe’s central bank - as well as the Bank of Japan - this week for clues on the fate of easy monetary policies that have helped stoke growth and spur equity markets to record highs. Amid mixed economic data, anemic inflation numbers and a US administration struggling to implement its agenda, traders may be forgiven for reassessing hawkish expectations.

“President Draghi will certainly have his work cut out in keeping a lid on the euro at this rate,” Michael Hewson, chief market analyst at CMC Markets UK, wrote in a note. A move to the 1.20 level is “a distinct possibility on a break of 1.1620 and last year’s high,” he said.

Here are some other key events coming up:

The industry-funded American Petroleum Institute was said to report an increase in US crude stockpiles; official data is on Wednesday. The Bank of Japan is forecast to stand pat at its meeting on Thursday.

And here are the main moves in markets:

Stocks

The S&P 500 Index was up 0.3% at 15:39, while the Nasdaq Composite increased 0.5%. Both indices hit record highs on Tuesday. The Stoxx Europe 600 climbed 0.6%, its biggest gain in a week. The UK’s FTSE 100 Index added 0.5%. The MSCI All-Country World Index rose 0.3% to 475.87, hitting the highest on record in its ninth straight day of gains.

Bonds and Currencies

The yield on 10-year Treasuries were flat at 2.26%. Germany’s 10-year yield fell two basis points to 0.54%. Britain’s 10-year yield also retreated 2 basis points to 1.188%.

The Bloomberg Dollar Spot Index dropped 0.1%. The euro declined 0.2% to $1.1531, the biggest fall in a week. The British pound slipped 0.1% to $1.3033. The Japanese yen fell 0.4% to ¥111.65/$.

Commodities

Gold gained less than 0.1% to $1 242.94 an ounce. West Texas Intermediate crude rose 0.2% to $46.61 a barrel. Iron ore added 2.7% to reach its highest level since May 3.

Asia

Australia’s S&P/ASX 200 Index rose 0.8% as bank shares climbed. Analysts said new capital requirements looked fairly benign. More on that story here. Chinese shares led in Asia, with the Shanghai Composite Index jumping 1.4%.

Hong Kong’s Hang Seng Index was up 0.6%. Japan’s Topix Index swung between gains and losses, while South Korea’s Kospi Index rose 0.2%.

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