Stocks rise, euro falls after ECB confirms end to Q3 bond purchases

A broker looks at a chart on his computer screen on the ICAP trading floor in London, Britain January 3, 2018. REUTERS/Simon Dawson

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  • Euro STOXX 600 extends gains
  • Euro turns negative, bond yields fall
  • The ECB maintains its monetary policy stance
  • Press conference scheduled for 12:30 GMT
  • Elon Musk offers to buy Twitter for $41 billion

LONDON, April 14 (Reuters) – Stocks rose as bond yields and the euro fell on Thursday as the European Central Bank signaled a steady reduction in stimulus, while Tesla CEO Elon Musk offered to buy Twitter for $41 billion in cash.

Confirming its earlier forecast, the ECB said it plans to scale back bond purchases – known as quantitative easing – this quarter and then end them at some point in the third quarter. Read more

After the ECB statement, the expanded Euro STOXX 600 (.STOXX) extended its gains, up 0.5%. The Paris and Frankfurt indices (.FCHI) both added 0.4%.

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Travel and leisure stocks (.SXTP) were among the best performers in morning trade, with low-cost airline Wizz Air (WIZZ.L) up more than 9% on encouraging signs of summer reservations.

“We have had confirmation that the asset purchase program will end in the third quarter,” said Stuart Cole, chief macro strategist at Equiti Capital in London.

“This leaves open the possibility of an interest rate hike before the end of the year and, as a result, market expectations of a first hike to come in December should strengthen.”

The euro plunged 0.25% to $1.0869 and eurozone bond yields fell sharply, with German two-year bond yields lately falling nearly 4 basis points on the day to 0.046% against 0.09% just before the ECB statement. .

Even as the ECB refrained from adopting a more hawkish stance, a string of central banks around the world tightened policy as they struggled to contain spiraling 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 50 basis points on Wednesday, the biggest hike in more than two decades. The Bank of Canada also raised rates by the same level, making its biggest move in more than two decades and signaling more hikes to come.

Market participants said growth in major economies would be key in determining whether central banks can tighten policy further.

“The big question for investors is no longer whether we need to rate more upsides, but rather upsides that are priced, how many of them can be delivered?” said Hugh Gimber, global market strategist at JP Morgan Asset Management.

“The key there will be the growth prospects.”

The MSCI World Equity Index (.MIWD00000PUS), which tracks stocks from 50 countries, added 0.2%. MSCI’s broadest index of Asia-Pacific stocks outside Japan (.MIAPJ0000PUS) previously rose 0.4%.

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Wall Street’s futures gauges fell slightly as a slew of lenders released their first-quarter results. Read more

Twitter Inc (TWTR.N) jumped 12% after Tesla CEO Elon Musk offered to buy the social media company for around $41 billion in cash, saying the social media company should become privacy to see effective changes. Read more

Hopes that US inflation had peaked led US Treasury yields to extend their decline as the dollar also fell.

The yield on 10-year Treasury bills was 2.6806%, down from a three-year high of 2.836%, ahead of Tuesday’s data that showed inflation lower than investors feared.

As US yields halted their advance, the dollar fell from a two-year high hit a day earlier.

The dollar index, which measures unity against six peers, added 0.1% to 99.861, after falling 0.5% overnight from its high of 100.52.

Oil prices fell amid weak trading volumes ahead of the Easter holiday, as traders weighed a bigger-than-expected rise in U.S. oil inventories against a tightening in global supply.

Brent crude futures fell 1.5% to $107.23 a barrel. Read more

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Reporting by Tom Wilson in London; Editing by Bernadette Baum

Our standards: The Thomson Reuters Trust Principles.

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