By Nick Brown
NEW YORK (Reuters) - The U.S. dollar rose against a basket of major currencies by more than a penny as the euro cratered, and U.S. stocks ticked up in afternoon trading on Thursday, as the European Central Bank signalled interest rate hikes were a long way off.
The bank's unexpectedly dovish decision overshadowed its statement that it aimed to wrap up its crisis-era stimulus programme at the end of this year.
The ECB now plans to reduce monthly asset purchases between October and December to 15 billion euros until the end of 2018 and then conclude the programme.
Investors, though, seized on comments indicating that interest rates would stay at record lows at least through the summer of 2019, and some analysts believed it may be longer.
"With Draghi's term of office due to expire at the end of October 2019, we feel the ECB is unlikely to start increasing interest rates until the new ECB president is firmly in place," said David Zahn, head of European fixed income for Franklin Templeton.
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The euro touched on its steepest one-day drop against the U.S. dollar since June 2016, and was down 1.64 percent at 1.160.
The dollar index , which measures the greenback against six other top currencies, rose 1.1 percent.
Ten-year government bond yields in Germany, the euro zone benchmark, fell around six basis points to 0.422 percent compared to Wednesday's close .
Oil markets, pressured by the strengthening dollar and fears that OPEC countries could decide to increase output at a meeting next week, ended mixed.
U.S. crude oil futures settled at 66.89 per barrel, up 0.38 percent, while Brent went the other way, settling down more than 1 percent at $75.94.
EQUITIES STRONG
Benefiting from the ECB's decision were stock markets on both sides of the Atlantic.
The pan-European FTSEurofirst 300 index rose 1.25 percent, reversing earlier losses, buoyed by big gains in interest rate-sensitive sectors like autos and utilities.
"The hawks had been guiding for a June hike before the [ECB] meeting and, given the clear guidance the ECB gave today on interest rates, it had to be priced out," said AFS Group analyst Arne Petimezas. "It doesn't seem like we're at the stage where the hawks are on top of things."
The effects were more measured in the U.S., where Wall Street indexes were creeping up, stabilized too by a U.S. Commerce Department report showing retail sales rose 0.8 percent last month, the biggest advance since November 2017.
The Dow Jones Industrial Average fell 49.71 points, or 0.2 percent, to 25,151.49, but the S&P 500 gained 4.48 points, or 0.16 percent, to 2,780.11 and the Nasdaq Composite added 50.68 points, or 0.66 percent, to 7,746.38.
Technology stocks were the biggest advancers, with Facebook and Alphabet leading the pack.
In U.S. Treasuries, benchmark 10-year notes last rose 9/32 in price to yield 2.9461 percent, from 2.979 percent late on Wednesday.
The 30-year bond last rose 21/32 in price to yield 3.0688 percent, from 3.102 percent Wednesday.
TRADE TENSIONS
One issue keeping investors in check was concern about U.S. threats to impose tariffs on $50 billion of Chinese goods. U.S. President Donald Trump was planning to meet with trade advisers later to decide whether to activate the tariffs, a senior administration official said on Wednesday.
CBOT corn and soybean futures tumbled as uncertainty about tariffs and favourable crop weather in the U.S. Midwest prompted funds to liquidate big long positions.
CBOT July corn <1CN8> fell to its lowest since mid-January and front-month soybeans dipped to a 9-1/2 month low. Traders are worried about China, Mexico and other countries curbing demand for U.S. grain and soy exports.
In a rare merging of the sports and trading worlds, markets are gearing up for soccer's World Cup in Russia, where time zone differences mean more matches during European, U.S. and Latin American trading hours than any previous tournament.
A study done during the last World Cup with similarly-timed games, the 2010 finals in South Africa, showed trading volumes on share markets dropped by a third on average when matches were on and 55 percent when a market's own team played.
(Additional reporting by Marc Jones, Danilo Masoni, Dhara Ranasinghe and Tommy Wilkes; Editing by Nick Zieminski and Bernadette Baum)