* Euro dips after ECB bond plan announced
* Euro zone blue chip index up 2.4 pct at 5-month highs
* German bond prices dip, peripheral yields fall
* Yields drop at Spanish and French debt sales
By Richard Hubbard
LONDON, Sept 6 The euro dipped but European
shares hit a five-month high after the European Central Bank
unveiled a new plan to tackle the region's debt crisis, while
strong U.S. private-sector jobs growth boosted Wall Street.
ECB President Mario Draghi said the central bank would
undertake unlimited, short-dated bond purchase under strict
conditions to ease funding pressures on governments that sought
help. He added that the ECB and would not expect better
treatment than other creditors in the case of default.
"Generally, I think it's a positive," said Peter Westaway,
chief economist for Europe at Vanguard Asset Management.
"There is a long-term question of whether this will be
enough to meet the long-term financing needs of Italy, and that
The euro fell to its lows for the day after the
announcement before settling down 0.25 percent at around $1.2570
and below last week's peak of about $1.2638, which was its
highest level since early July.
The EuroSTOXX 50 index of euro zone blue-chip stocks
, which closely tracks swings in sentiment in the
17-nation currency bloc, was up about 2.4 percent at 2,500.15
points, its highest level since early April.
The broader, pan-European FTSEurofirst 300 index
rose 1.6 percent at 1,096.75 points, adding to gains made
earlier in the session.
"I think the market had been building itself up for a much
more concrete resolution, and though the snap reaction from the
market has been pretty sanguine, it certainly hasn't sent the
markets off to the races," said Richard Hunter, Head of UK
equities at Hargreaves Lansdown.
In the debt markets, safe-haven U.S. Treasury
and German government bond prices, which had
dipped before the ECB announcement, edged down further, while
peripheral euro zone bond prices moved higher.
As a result 10-year German Bund yields were up
8 basis points at 1.5 percent on Thursday, with equivalent
Spanish and Italian debt yields dropping to 6.1 and 5.32
percent, respectively. .
Earlier the prospect of future central bank buying also
ensured successful debt sales by Spain and France.
Spain sold 3.5 billion euros of shorter term debt and France
shifted 7.98 billion euros of five-, 10- and 15-year bonds,
with both auctions resulting in lower yields than at previous
sales. The drop was sharp at the Spanish auction.
Commodity prices followed other risk assets higher on signs
of improvement in the U.S. labor market ahead of Friday's August
U.S. payrolls report.
U.S. private employers added a stronger-than-expected
201,000 jobs in August, and new claims for jobless benefits fell
last week to the lowest level in a month, upbeat signals for a
struggling labor market.
The increase in private hiring, reported by payrolls
processor ADP, was the largest since March. However, economists
still think the government's more comprehensive employment
report due on Friday will show only modest hiring during August.
In early trade the Dow Jones industrial average
gained 90.05 points, or 0.69 percent, to 13,137.53. The Standard
& Poor's 500 Index rose 8.58 points, or 0.61 percent, to
1,412.02. The Nasdaq Composite Index climbed 23.09
points, or 0.75 percent, to 3,092.36.
Brent crude futures had climbed $1.38 to $114.48 per
barrel. U.S. crude gained $1.74 to $97.10 a barrel.
However, gold edged away from its highs as the strong jobs
data dents the case for a third round of monetary easing, also
known as quantitative easing (QE3), by the Federal Reserve.
Spot gold was virtually unchanged on the day at
$1,700.70 an ounce, still near six-month highs.