GLOBAL MARKETS-Euro shares rise, debt tensions ease before ECB meeting

Thu Jul 4, 2013 6:04am EDT

* Portugal bond yields holding at 7.5 percent, ECB in focus
    * European shares recover previous day's losses
    * Euro edges lower, oil eases as Egypt's president
overthrown

    By Marc Jones
    LONDON, July 4 (Reuters) - European bond and stock markets
rose on Thursday as investors put concerns about political
turmoil in Portugal to one side ahead of central bank meetings
in Frankfurt and London, and Friday's U.S. jobs report.
    Portuguese bond yields steadied at 7.5 percent after opening
at 7.7 percent, while Italian and Spanish bond markets were
quiet following a sharp sell-off on Wednesday, when a deepening
crisis threatened to derail Lisbon's efforts to exit its
bailout.
    The market focus fell squarely on the European Central Bank,
which economists expect to keep policy on hold later on
Thursday. The same goes for the Bank of England which holds its
first meeting under new governor Mark Carney.
    But they do expect to hear calming words to reassure
investors rattled by Portugal's troubles and the U.S. Federal
Reserve's plans to begin winding down its stimulus.
    "There is a consensus that the ECB will not touch rates or
announce any new additional measures although personally I
expect (president Mario) Draghi to be a little more dovish than
at the last meeting," said UniCredit interest rate strategist
Luca Cazzulani.
    "Focus on Portugal is pretty high but there has been a
limited spillover into Spain and Italy so far."
    With U.S. markets closed for the Independence Day holiday
and investors also keeping positions tight ahead of U.S. jobs
data on Friday, the risk was that any surprise moves by the
central banks or in Portugal could have a heavily amplified
market impact.
    European shares were up 0.75 percent by mid-morning
as markets in London, Frankfurt and Paris wiped off the previous
session's losses, though afternoon trading was expected to be
choppy around the ECB's 1230 GMT post-meeting news conference.
    Asian stocks made similar gains overnight, building on a
positive finish on Wall Street. Investors were already
positioning for Friday's non farm payrolls data, one of the key
measures of U.S. economic health for the Federal Reserve as it
looks to scale back its $85-billion-a-month stimulus programme. 
    
     
    
    HEALING WORDS
    In the currency market, the euro hovered just below
$1.30 as traders awaited the ECB's message following the recent
market jitters, while the dollar sold off against the yen
.
    Rising tensions in Portugal - where the resignation of two
ministers within days saw bond yields jump back to crisis levels
of 8 percent on Wednesday - coincide with fresh debt worries in
Athens, where the government faces an end-of-week deadline to
prove to its lenders it can push through tough reforms.
    The signs of stress on the euro zone's periphery risk
sapping confidence in the region a year after Draghi vowed to do
"whatever it takes" to save the euro, and analysts feel the
Italian and his colleagues may have to give a renewed show of
commitment.
    "I am expecting some healing words from Draghi, which should
calm fears over the situations in Portugal and Greece because it
is a very psychologically driven market," Rolf Bland, chief
investment officer at VZ Vermogenszentrum in Zurich, said."
    In Egypt, the overthrow by the army of President Mohamed
Mursi drew a positive reaction from investors. The country's
five-year debt insurance costs falling 80 basis points and its
sharply and its stock market gaining 6 percent. 
    With the threat of a disruption in supplies from the Middle
East seen as having eased after the events in Cairo, Brent oil
 slipped to $105.30 a barrel from a two-week high.
    Other commodity markets saw limited moves ahead of Friday's
U.S. data. Gold edged up for a second session as Portugal
and Egypt's troubles prompted safe-haven buying, while
growth-attuned copper hovered near a two-week high.
    "If we get a sense that U.S. growth is not where people
think it might be yet, that could undermine the dollar and be in
general more supportive for commodity prices," said Barclay's
commodities analyst Sijin Cheng.