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ECB, U.S. data help buoy global stocks, euro

The president of the European Central Bank (ECB) Mario Draghi

THE euro rose against the dollar on Thursday after the European Central Bank gave no sign of an imminent interest rate cut while better-than-expected U.S. unemployment data helped lift major world stock prices.

Relative calm in vulnerable emerging markets such as Turkey and South Africa also supported riskier assets and drew investors away from safe-haven U.S. and German government bonds.

The ECB left its main interest rate at 0.25 per cent Thursday but the central bank’s president, Mario Draghi, surprised markets by not signalling a near-term rate cut during remarks to reporters despite deflation worries in the 18-country euro zone.

Draghi’s remarks sent the euro, which had lost ground against the dollar immediately after the decision, to a one-week high of $1.3619 before easing to $1.3608 and pushed up German bund yields.

European stocks were up 1 per cent on the day, while U.S. stocks rose, boosted by data showing fewer Americans than expected filed for first-time jobless benefits last week.

U.S. jobless claims “are still higher than where they were six weeks ago but are still consistent with a decent job market,” said Craig Dismuke, chief economic strategist at Vining Sparks in Memphis. “The underlying trend is still positive.”

National U.S. employment data due on Friday is expected to show the economy added 185,000 new jobs last month. Smaller-than-expected job gains in December have raised concern about the strength of the U.S. recovery, which sped up in late 2013.

The Dow Jones industrial average was up 133.32 points, or 0.86 per cent, at 15,573.55. The Standard & Poor’s 500 Index was up 13.51 points, or 0.77 per cent, at 1,765.15.

The Nasdaq Composite Index was up 39.05 points, or 0.97 per cent, at 4,050.61.

The MSCI world equity index rose 1 per cent, while the yield on benchmark U.S. 10-year Treasuries rose to 2.7 per cent after the ECB announcement encouraged risk appetite and investors positioned ahead of Friday’s U.S. jobs report.

Relative calm in the capital-hungry emerging markets of Turkey, South Africa and India also lifted developing stocks, after a rout that drove safe-haven bids to U.S. Treasuries and the yen.

Emerging stocks were up 1.2 per cent after hitting five-month lows earlier this week, while the Turkish lira and South African rand held above recent troughs.

The banking sector was in the spotlight after Credit Suisse missed expectations with a marginal uptick in fourth-quarter net profit, and its shares were down more than 2 per cent.

U.S. crude oil rose $1.11 to $98.49 a barrel.

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