new York 09 06, 2012, 21:10 IST
The S&P 500 rose to its highest level in more than four years and European blue chip stocks jumped on Th ursday after the European Central Bank announced an aggressive bond-buying program to stop the spread of the euro zone's debt crisis.
The euro gained slightly after ECB President Mario Draghi said the central bank would undertake unlimited, short-dated bond purchases under strict conditions to ease funding pressures on governments that sought help. He added that the ECB and would not expect better treatment than other creditors in the case of default.
The EuroSTOXX 50 index of euro zone blue-chip stocks <.STOXX50E> jumped about 3.3 percent to its highest level since early April. On Wall Street, the S&P 500 jumped nearly 1.8 percent to reach its highest since May 2008.
"It's definitely giving more comfort to the market," said Rex Macey, chief investment officer of Wilmington Trust Investment Advisors. "It was what the market was looking for, and we can see that the yields on Italian, Spanish and Portuguese bonds have already come down."
The euro surrendered gains against the dollar after Draghi said at a press conference that the bank had cut its growth forecast for the euro zone. But it then recovered and traded at $1.2627, up 0.2 percent.
The euro zone economy will probably contract more than previously expected this year, according to new European Central Bank staff forecasts that also raised the bank's outlook for inflation for 2012/2013.
The Dow Jones industrial average <.DJI> was up 224.61 points, or 1.72 percent, at 13,272.09. The Standard & Poor's 500 Index <.SPX> was up 24.85 points, or 1.77 percent, at 1,428.29. The Nasdaq Composite Index <.IXIC> was up 54.52 points, or 1.78 percent, at 3,123.78.
In the debt markets, safe-haven U.S. Treasury and German government bond prices, which had dipped before the ECB announcement, edged down further, while peripheral euro zone bond prices moved higher.
As a result, 10-year German Bund yields were up 8 basis points at 1.5 percent on Thursday, with equivalent Spanish and Italian debt yields dropping to 6.1 and 5.32 percent, respectively..
The benchmark 10-year U.S. Treasury note was down 23/32, the yield at 1.6746 percent.
INFORMATIVE LINKS:
Euro zone debt crisis: http://r.reuters.com/hyb65p
Central bank interest rates: http://link.reuters.com/jyv94s
Commodity prices vs year ago: http://link.reuters.com/gav45s
Commodity prices followed other risk assets higher. Signs of improvement in the U.S. labor market ahead of Friday's August U.S. payrolls report were also a contributing factor.
Reports on Thursday showed U.S. private employers added a stronger-than-expected 201,000 jobs in August, and new claims for jobless benefits fell last week to the lowest level in a month, upbeat signals for a struggling labor market.
The increase in private hiring, reported by payrolls processor ADP, was the largest since March. However, economists still think the government's more comprehensive employment report due on Friday will show only modest hiring during August.
Brent crude futures climbed $1.6 to $114.67 per barrel. U.S. crude gained $1.95 to $97.31 a barrel.
Gold rose to six-month highs. Spot gold climbed 1 percent on the day to $1,708.71 an ounce, still near six-month highs.
The prospect of future central bank buying also ensured successful debt sales by Spain and France.
Spain sold 3.5 billion euros of shorter term debt and France
shifted 7.98 billion euros of five-, 10- and 15-year bonds, with both auctions resulting in lower yields than at previous sales. The drop was sharp at the Spanish auction.
