GLOBAL MARKETS-Europe stocks, bond up post-ECB, U.S. jobs eyed

Reuters - UK Focus

* Europe stocks, bonds rise, buoyed by ECB's action

* Low-rated euro zone bond yields hit record lows

* Eyes on U.S. jobs data

(Updates prices)

By Jamie McGeever

LONDON, June 6 (Reuters) - European stocks rose and bond

yields tumbled on Friday in markets buoyed by the European

Central Bank's promise of another tidal wave of

deflation-dousing cash, but impending U.S. jobs data kept

investors cautious.

Benchmark 10-year government borrowing costs for Italy,

Spain and Ireland (Other OTC: IRLD - news) all plunged to record lows, with the Irish

yield 11 basis points below comparable U.S. borrowing costs.

Stock markets rose too, with bank shares leading the way and

putting the pan-European index of Europe's leading 300 shares on

track for its eighth consecutive weekly gain.

U.S. stock index futures pointed to a higher open on

Wall Street after May's non-farm payrolls report due at 1230

GMT.

There was less movement in currency markets, which swung

violently on Thursday after the ECB cut interest rates -

including taking deposit rates for banks below zero - and

pledged hundreds of billions more euros of cheap funds for

banks.

"The ECB decisions were largely in line with what the market

was expecting. However, the negative deposit rate is certainly a

brave move and hinting that QE (quantitative easing) is a

possibility if necessary should be very welcome news," said Mark

Ward, head of execution trading at Sanlam Securities.

The ECB refrained from following the U.S., Japanese and

British central banks in pursuing outright bond-buying. But its

president, Mario Draghi, did not rule it out in the future,

saying, "We aren't finished here".

At 1115 GMT the FTSEurofirst 300 share index was up

0.4 percent at 1,385 points, with financials up 1.0 percent

.

Germany's DAX rose 0.3 percent to 9,981 points. On

Thursday, it broke above 10,000 points for the first time.

Britain's FTSE 100 was up 0.4 percent at 6,840

points, and France's CAC 40 up 0.5 percent at 4,560

points.

U.S. JOBS UP NEXT

Investors' appetite for risky assets and higher returns was

most evident in euro zone peripheral bond markets, where buyers

pushed yields to their lowest on record.

Italian 10-year yields fell 18 basis points to

2.77 percent, Spanish equivalents were down 17 bps

at 2.66 percent and Irish yields fell 11 bps to

2.47 percent.

"The real consensus coming out of the ECB meeting is that

these measures will be supportive of the (European) periphery,"

said Anton Heese, co-head of European interest rates strategy at

Morgan Stanley (Berlin: DWD.BE - news) . "This should be filtering through into lower

funding costs in the periphery."

The yield on 10-year German bonds, the benchmark for euro

zone borrowing, fell 4 bps to 1.32 percent.

Analysts at SocGen (Paris: FR0000130809 - news) said this reflected concerns that the

ECB's measures to fend off deflation might not succeed. They

also pointed to the euro's sharp rally well above $1.36

from the four-month low around $1.35 immediately after the ECB

statement and Draghi's news conference on Thursday.

The euro was down 0.2 percent on the day round $1.3635, with

traders saying major moves were unlikely as billions of dollars

of options at $1.36 and $1.3650 expire later in the day, and

before the U.S. jobs data.

The dollar was up a shade against a basket of currencies

at 80.433.

Traders hunkered down ahead of the U.S. jobs report, with

the median forecast showing the U.S. economy added a solid

218,000 jobs last month, down from 288,000 in April. Estimates

range from 110,000 to 325,000.

Richard Hunter, head of equities at Hargreaves Lansdown (LSE: HL.L - news) ,

said the ECB's move could soothe market jitters over a downbeat

number.

"There's every possibility of a sell-off should the number

disappoint, but ... that could yet be short-lived," he said.

Earlier in Asia, MSCI (NYSE: MSCI - news) 's broadest index of Asia-Pacific

shares outside Japan rose 0.25 percent and

Japan's Nikkei closed flat at 15,077.

Yields on two-year U.S. Treasury notes were at 0.38 percent

after dipping 2 basis points on Thursday, while those

on 10-year paper fell 1.4 bps to 2.57 percent.

Gold steadied at $1,251 having enjoyed its biggest

gain in three weeks overnight as buyers were encouraged by the

prospect of yet-lower rates for longer in the euro zone.

Brent crude oil nudged higher to just under $109 a

barrel.

(Additional reporting by John Geddie, Tricia Wright and Nigel

Stephenson in London and Alistair Smout in Edinburgh; Editing by

Ruth Pitchford; To read Reuters Global Investing Blog click on http://blogs.reuters.com/globalinvesting;

for the MacroScope Blog click on http://blogs.reuters.com/macroscope;

for Hedge Fund Blog Hub click on http://blogs.reuters.com/hedgehub)

View Comments (0)