GLOBAL MARKETS-ECB corporate bond buying plans lift stocks, hurt euro
* European shares surge on report ECB to buy corporate bonds
* Wall Street to start up, earnings from Coca Cola (NYSE: KO - news) ,
McDonalds due
* Nikkei slips 2 pct, giving back half of Monday's rally
* US Treasury yields back above 2.20 pct as dollar rebounds
By Marc Jones
LONDON, Oct 21 (Reuters) - European shares got a major lift
while the euro and the region's bond yields fell on Tuesday
after European Central Bank insiders told Reuters the bank was
readying a plan to buy corporate bonds.
The move could start at the beginning of next year and
though not the kind of full-scale government bond buying that
markets have been angling for, it would be a major step up by
the ECB as it battles a slowing euro zone economy.
European shares jumped immediately after the
report, with Italian, French and Spanish
stocks -- potentially the main beneficiaries of the
ECB's actions -- leading the way among the main bourses as they
surged 1.8 to 2.2 percent.
The euro tumbled to a session low of $1.2760 against
the dollar, while there was a complete turnaround in bond
markets with a rush down southern euro zone yields and a rush up
German ones.
"There has definitely been an impact on the markets," said
Luca Jellinek head of European interest rates strategy, at
Credit Agricole.
"I don't know that buying corporate bonds really changes the
underlying issues of low growth and low inflation, but any sign
from the ECB that it will do more is a positive."
Traders had already been giving a tentative thumbs up to
growth data from China earlier as world markets
continued to recover from last week's heavy falls, although the
data did not change the perception that the world's
second-biggest economy will continue to slow.
China's economy grew 7.3 percent in July-September official
Beijing data showed, slightly above the 7.2 percent forecast by
analysts. However, it was the weakest for any quarter since the
2008/09 global financial crisis.
With the euro tumbling on the ECB bond-buying news,
the dollar gained some traction and left the dollar
basket up 0.2 percent after its 2 percent slide over the last
couple of weeks.
The Australian dollar, often seen as a liquid proxy
of Chinese growth prospects given Australia's large trade
exposure, got a lift from Beijing's data, but had handed back
some of those gains in Europe.
"The euro is the major move," said Vasileios Gkionakis,
global head of FX strategy at UniCredit (Milan: UCG.MI - news) in London. "We started
the day with a fairly bearish mood on the dollar but that
changed after we saw the headlines on the ECB (buying corporate
bonds)."
EARNINGS
Europe's positive sentiment was expected to follow into U.S.
trading, with U.S. futures pointing to early gains of 0.8
percent for the S&P 500 and almost 1 percent for the Dow
Jones industrial.
Gadget giant Apple (NasdaqGS: AAPL - news) reported a better-than-expected
12 percent jump in revenue on Monday and U.S. retail sales data
is due later alongside another flurry of earnings, including
from Coca Cola, McDonalds and Lockheed Martin.
.
A breakdown of the earlier China data showed industrial
output rose a better-than-expected 8.0 percent in September from
a year earlier, up from August's six-year low of 6.9 percent
growth.
However, fixed-asset investment and retail sales figures
were weaker than expected. The Shanghai Composite index
slipped 0.4 percent, while MSCI (NYSE: MSCI - news) 's broadest index of Asia-Pacific
shares outside Japan ended broadly flat.
Japan's Nikkei also took a heavy 2 percent hit, as
the yen took advantage of a weakened dollar in Asian trading and
as investors locked in profits after the previous session's 4
percent rally.
OIL, TREASURY YIELDS REBOUND
The wilting of the dollar this month has come amid signs
that with global growth and inflation falling, the U.S. Federal
Reserve may hold off from a first post-financial crisis interest
rate hike until deep into next year.
Yields on benchmark U.S. 10-year government bonds
climbed back above 2.20 percent in European trade
though. German Bund yields led the way as the ECB bond-buying
news encouraged investors out of safer but lower-yielding
assets.
Dallas Federal Reserve President Richard Fisher also said on
Monday that last week's market turbulence should not stop the
Fed from ending its stimulus programme, and that the economy
could be fully recovered from the effects of the financial
crisis and recession by as early as next year.
Shares (Berlin: DI6.BE - news) in French oil giant Total were also in
focus in Europe after its chief executive Christophe de Margerie
was killed when his plane collided with a snow plough during
takeoff at a Moscow airport.
Like much of the region's stock markets, though, Total
shares fought back from a early 1.2 percent drop to climb
higher.
In commodities trading, spot gold added about 0.3
percent to $1,249 an ounce, bolstered in part by renewed
physical demand ahead of the Diwali festival in India this week.
Oil also clawed back some more of its recent sharp
losses as Brent crept up to $85.75 a barrel and U.S. crude
hovered at $82.87.
(Additional reporting by China Economics Team; Editing by Susan
Fenton)
