GLOBAL MARKETS-Ukraine diplomacy hopes lift stocks; euro rises on ECB

Thu Mar 6, 2014 2:31pm EST

* Stocks rise on efforts to resolve Ukraine crisis

* Euro hits year high after ECB signals no stimulus

* Investors shift focus on U.S. payrolls data due Friday

* Bonds fall, oil stabilizes, gold rebounds

By Richard Leong

NEW YORK, March 6 (Reuters) - World share markets rose on Thursday, supported by hopes that diplomatic efforts would cool the crisis in Ukraine, while the euro advanced to its highest level of the year after the European Central Bank signaled the euro zone needs no additional stimulus.

The latest developments in Ukraine, while still worrisome, have not caused investors to back away from stocks and risky investments on a global scale, as occurred on Monday.

"The markets have adapted to this fluid situation," said Gerardo Rodriguez, senior investment strategist for BlackRock's Emerging Markets group in New York.

MSCI's world equity index, which tracks shares in 45 countries, was up 0.5 percent, and the MSCI emerging market index rose 1.1 percent.

Crimea's parliament voted to join Russia and its Moscow-backed government set a referendum for 10 days' time on the decision in a dramatic escalation of the crisis in the Ukrainian Black Sea peninsula.

U.S. President Barack Obama took steps to punish those involved in threatening Ukraine while European Union leaders agreed to suspend visa and investment talks with Russia.

These events reminded investors that the dispute is far from being resolved but the risk of war has faded.

"Right now, the biggest threat has diminished," said Kathy Jones, fixed income strategist at Charles Schwab in New York.

European central bankers offset the geopolitical worries when, as expected, they left interest rates unchanged but offered no signal the ECB will implement unconventional measures such as bond purchases to avert the threat of excessively low inflation and underpin a fragile recovery.

The Bank of England, also meeting on Thursday, kept interest rates unchanged, seeking to give the economy more time to build momentum before removing stimulus.

The ECB's show of restraint on monetary stimulus bolstered the euro, boosting it to $1.3857, the highest since late December, according to Reuters data.

The euro zone common currency bought 142.72 yen, up 1.6 percent from late on Wednesday but still below the high of 145.09 set on Jan. 1.

European stocks were also supported by the ECB's decision. The FTSEurofirst 300 index tracking Europe's top shares ended little changed at 1,344.56.

"European stocks have been quite resilient in the face of the multiple shocks, from the Fed's tapering to the Ukrainian crisis, even though risks seem limited," said Francois Chevallier, a strategist at Banque Leonardo in Paris.

On Wall Street, the Dow Jones industrial average rose 69.61 points or 0.43 percent, to 16,429.79, the S&P 500 gained 3.74 points or 0.2 percent, to 1,877.55 and the Nasdaq Composite dropped 6.985 points or 0.16 percent, to 4,350.989. The S&P 500 had set a record close on Tuesday.

Earlier, Tokyo's Nikkei closed up 1.6 percent.

Russian shares were a notable exception, falling nearly 1 percent, while the ruble weakened 0.5 percent against the U.S. dollar at 36.2190 rubles.

Due to the resilience in stock prices, investors further pared their holdings in less risky U.S. and German government bonds. The yield on U.S. 10-year Treasuries rose 4 basis points to 2.73 percent, while the yield on 10-year Bunds gained 5 basis points to 1.65 percent.

In the oil market, Brent crude was last up 36 cents, or 0.33 percent, at $108.12 a barrel. U.S. crude was last up 11 cents, or 0.11 percent, at $101.56 per barrel.

Gold traded in a right range with investors awaiting cues from Friday's U.S. jobs data and developments in Ukraine. It rose $12.95 or 0.97 percent, to $1,349.96 an ounce.

As markets calmed after gyrating on Russia-West tension this week over the Ukraine crisis, investors have shifted their focus to the U.S. payrolls data due 8:30 a.m. (1330 GMT) on Friday, which might show anemic hiring due to harsh winter weather across much of the country.

Economists polled by Reuters forecast U.S. employers likely hired 149,000 workers in February, compared with 113,000 in January, while the unemployment rate likely held at a five-year low of 6.6 percent.

Comments (0)
This discussion is now closed. We welcome comments on our articles for a limited period after their publication.