* ECB easing speculation intensifies
* Euro at one-year low, bond yields under pressure
* Stocks buoyant, but Europe pauses for breath
By Jamie McGeever
LONDON, Aug 27 The euro extended its slide on
Wednesday, hitting its lowest level in a year against the dollar
as expectation grew that the European Central Bank will act soon
to counter low growth and inflation.
Government bond yields around the world remained under
pressure and stock markets were buoyant on the prospect of
further stimulus in the world's second largest economic bloc,
although European bourses struggled to make any much headway
following two days of strong gains.
Fueling the ECB easing speculation, Italian Economy Minister
Pier Carlo Padoan said Italy must lower its growth forecast for
this year and German consumer sentiment fell for the first time
since early last year.
Steve Barrow, senior strategist at Standard Bank in London,
said the ECB faced a tough task in getting the market to believe
it will bring inflation back up towards its target of close to,
but below 2 percent.
"It will probably require things like QE (quantitative
easing), much lower bond yields - and a much lower euro," he
Euro zone inflation data due on Friday is likely to show a
new low for this cycle of just 0.3 percent and add to the sense
of urgency on policy.
ECB president Mario Draghi's call last week for more action
on both the monetary and fiscal fronts has markets wagering that
fresh steps could come as soon as next week when the central
bank's governing council meets.
German Finance Minister Wolfgang Schaeuble on Wednesday,
however, cooled some of the fevered speculation, saying Draghi's
comments had been "overinterpreted".
The euro broke down to an 11-month low of $1.3152 in
Asian trade on Wednesday before recovering some ground to
$1.3185 in early European trade, slightly higher on the day.
The euro's earlier weakness helped lift the U.S. dollar
index to its highest level in 13 months at 82.698 before
it too eased back. The greenback dipped against the yen below
104 yen, further back from Monday's 7-month peak at 104.49.
The prospect of yet more lashings of liquidity in Europe was
taken as a positive for emerging markets and MSCI's broadest
index of Asia-Pacific shares outside Japan
gained 0.4 percent to its loftiest since January 2008.
The major European markets paused after recent gains, with
the FTSEurofirst 300 index of leading shares, Germany's
DAX and Britain's FTSE 100 all flat on the day
at 1376 points, 9583 points and 6823 points, respectively.
The Italian and French markets were both down around 0.1
The three major U.S. indices were called to open slightly
higher, extending Wall Street's rally after the S&P 500
ended Tuesday above the 2,000 mark for the first time.
EURO YIELDS NOSEDIVE
In European bond markets German Bund futures came within one
tick of the all-time contract high of 151.10, while 10-year bond
yields fell one basis point to 0.937, within a
whisker of Monday's record low 0.926 percent.
The rally on the periphery has been even larger. Spanish and
Italian bond yields both hit new record lows for the third
consecutive day, down seven and five basis points, respectively,
at 2.12 and 2.38 percent.
Markets also kept a wary eye on developments in Ukraine
after Russian President Vladimir Putin met his Ukrainian
counterpart Petro Poroshenko for one-on-one talks.
Poroshenko said a "roadmap" would be prepared to agree to a
ceasefire as soon as possible in east Ukraine, while Putin
emphasised it was up to Kiev to work out conditions with
pro-Russian separatist rebels.
In commodities, gold was hovering at $1,285 an ounce
after failing to sustain a bounce to $1,290.80.
Oil prices clawed back some of their recent losses. Brent
crude inched up 44 cents to $102.94 a barrel, while U.S.
crude rose 26 cents to $94.12.
(Reporting by Jamie McGeever, additional reporting by Wayne
Cole; Editing by Crispian Balmer; To read Reuters Global
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