LONDON Feb 6 World stocks edged up from this
week's four-month lows in cautious trade ahead of a euro zone
monetary policy decision later on Thursday, supported by
relative calm in vulnerable emerging markets.
The euro was steady to weaker as some investors bet that the
European Central Bank could surprise markets with another
interest rate cut to ward off the threat of deflation after last
month's unexpectedly soft inflation reading.
The broad consensus is that there will be no change in the
bank's record low benchmark rate of 0.25 percent
"We have seen a hefty decline, but overall we should not be
too worried because the fundamentals of the market have not
changed much. The outlook for the equity market is staying
constructive, but we need to be cautious," Gerhard Schwarz, head
of equity strategy at Baader Bank.
"The ECB will likely refrain from cutting rates today, but
they will make it clear that they stand ready to act, should
things deteriorate from here. And that should give the market
The MSCI world equity index rose 0.2
percent, while European stocks followed Asia higher by
gaining half a percent.
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
Emerging stocks rebounded 0.6 percent from this
week's five-month lows while the Turkish lira and South
African rand held above recent lows.
The banking sector will be 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
"The earnings season hasn't been that bad so far, but people
that have been hoping for a real pick-up in revenues will have
to wait. We're not there yet," a Paris-based equity and
exchange-traded fund trader said.
The euro was down slightly on the day at $1.3522 and
137.14 yen. The dollar rose 0.1 percent against a
basket of major currencies. German bond futures
were broadly steady.
The ECB is due to announce its decision at 1245 GMT. Some
investors also speculate it could suspend its sterilisation
programme - operations to soak up money put back in circulation
from the ECB's buying of government debt.
At minimum, investors expect the ECB chief Mario Draghi to
drop hints of his readiness to ease, which could help counter
worries about dwindling stimulus from the Federal Reserve.
"I don't think the market is particularly long (on Bunds) so
there's room for some sizeable gains there if they cut. The
market is long of periphery but any signs of easing from the ECB
should support them as well," one bond trader said.
The benchmark 10-year Treasury yield was steady at 2.6675
percent after weak U.S. manufacturing data earlier
in the week pushed it to a three-month low.
Investors are looking for Friday's highly anticipated U.S.
jobs report to show solid growth after encouraging private
sector jobs numbers on Wednesday.
Economists surveyed by Reuters expect Friday's data will
show that employers added 185,000 jobs in January.
U.S. crude oil rose 0.2 percent to $97.59 a barrel.