Stocks rose while bond yields and the euro fell on Thursday as the European Central Bank signalled a steady reduction of its stimulus, while Tesla CEO Elon Musk offered to buy Twitter for $41 billion in cash.
Confirming its earlier guidance, the ECB said it plans to cut bond purchases – known as quantitative easing – this quarter, then end them at some point in the third quarter.
After the ECB’s statement, the broader Euro STOXX 600 extended gains, rising 0.5%. Indexes in Paris and Frankfurt both added 0.4%.
Travel and leisure stocks were among the top gainers in morning trading, with low-cost airline Wizz Air up over 9% on signs of encouraging summer bookings.
“We have had confirmation that the asset purchase programme will end in Q3,” said Stuart Cole, chief macro strategist at Equiti Capital in London.
“That leaves open the possibility of an interest rate rise being delivered before year-end and accordingly market expectations of a first hike coming in December are likely to firm.”
The euro dipped 0.25% to $1.0869 and euro zone bond yields fell sharply, with two-year German bond yields last down almost 4 basis points on the day at 0.046% versus 0.09% just before the ECB statement..
Even as the ECB refrained from a more hawkish stance, a string of central banks across the world have tightened policy as they struggle to rein in spiralling inflation.
On Thursday the Bank of Korea surprised markets with a rate hike and the Monetary Authority of Singapore also tightened policy.
New Zealand’s central bank raised interest rates by a hefty 50 basis points on Wednesday, the biggest hike in over two decades. The Bank of Canada also raised rates by the same level, making its biggest single move in more than two decades and flagging more hikes to come.
Market players said growth in major economies would be key to whether central banks can tighten policy further.
“The big question for investors now is not whether we need to be pricing more hikes, but rather of the hikes that are priced, how many of them can be delivered?” said Hugh Gimber, global market strategist at J.P. Morgan Asset Management.
“The key there is going to be the growth outlook.”
The MSCI world equity index, which tracks shares in 50 countries, added 0.2%. MSCI’s broadest index of Asia-Pacific shares outside Japan had earlier risen 0.4%.
MUSK TWITTER BID
Wall Street futures gauges fell slightly as a slew of lenders unveiled first-quarter earnings.
Twitter Inc jumped 12% after Tesla CEO Elon Musk offered to buy the social media company for about $41 billion in cash, saying the social media company needs to go private to see effective changes.
Hopes that U.S. inflation may have peaked led U.S. Treasury yields to extend their decline, with the dollar also falling.
The yield on 10-year Treasury notes was at 2.6806%, compared to a three-year peak of 2.836%, before data on Tuesday that showed inflation running lower than investors had feared.
As U.S. yields paused their march higher, the dollar fell from a two-year peak hit a day earlier.
The dollar index, which measures the unit against six peers, added 0.1% to 99.861, after a 0.5% overnight fall from its high of 100.52.
Oil prices slipped amid thin trading volumes ahead of the Easter break, as traders weighed a larger-than-expected build in U.S. oil stocks against tightening global supply.
Brent futures were down $1.5% at $107.23 a barrel.