* Euro, pound claw back vs dollar; ECB, BOE hold rates
* European shares, bonds add to gains as periphery extends
* U.S. crude prices come off 5-week low
* U.S. focus on start of earnings season, jobs data
By Marc Jones
LONDON, Jan 9 A strong rally in euro zone
periphery bonds and stocks extended into a third day as
investors, awaiting signals from the European Central Bank, bet
on further economic improvements in the bloc.
The ECB and the Bank of England both kept their respective
0.25 percent and 0.5 percent interest rates unchanged on
Thursday, but markets were on alert for any signs of future ECB
monetary stimulus moves or shifts in the economic outlook.
A jump in the euro zone sentiment index to a 29-month high
for December set a positive mood for the ECB's 1330 GMT news
conference, having helped re-ignite markets, particularly those
in southern Europe, after a brief early wobble.
Spanish and Italian bourses had both jumped more than 1
percent by 1100 GMT, while Portugal's main stock market added
over 0.5 percent to take its gains so far this year past 8
Their bonds were in demand again too and both the
euro and sterling were also able to claw back some ground they
have conceded in recent days to the dollar, which had been
lifted by strong U.S. data.
The pound was at $1.6469 while the euro looked the
firmer of the two gainers up 0.3 percent at $1.3610. But
with euro zone inflation bumping along at very low levels, HSBC
FX strategist David Bloom expected the ECB to reiterate it
remains on guard later - a move that could weaken the currency.
"I would say at least some dovish rhetoric from the ECB... I
think this mini dollar-rally, on the view the Fed is going to
taper (the amount it pushes out as stimulus) and the ECB is
going to loosen (eventually), is going to stay with the market."
ECB chief Mario Draghi has been at pains to stress in recent
months that the bank is prepared to ease its record low interest
rates below 0.25 percent and test out other, more
unconventional, policy options if necessary.
With euro zone inflation running at just 0.8 percent in
December, deflation could become a risk if prices continue to
In most respects though, the euro zone has got off to a good
start this year. Germany's economy is gaining strength and
bailed-out Ireland has seen a strong return to borrowing
markets, which in turn has lifted Portugal and other peripheral
Across the channel, Britain is performing even more
strongly. Some traders had suggested the Bank of England might
release a rare post-meeting statement to acknowledge the UK
economy's progress, but it didn't. There was little reaction
from sterling or gilts.
In Asian trading, shares once again wavered after a
lacklustre performance on Wall Street overnight, following
Federal Reserve minutes and ahead of the U.S. jobs report on
A sharper-than-expected slowdown in China's annual consumer
inflation in December also caused some jitters in Asia but
market reaction was limited.
New York was expected to see small rebound when trading
resumes, but the first five trading days don't bode particularly
well for 2014.
Since 1950, the direction of the S&P500 index of U.S. blue
chips in the first five trading days of the year has
predicted the full-year direction more than 85 percent of the
time. At Wednesday's cut-off, it was still just in the red.
Perhaps more relevant for harder-headed investors will be
the fourth-quarter earnings season in the United States, which
kicks off on Thursday with earnings from mining giant Alcoa
There will also be jobless claims figures at 1330 GMT, which
are likely to set the tone for Friday's key non-farm jobs data.
"This is the "show me" year in terms of earnings," said Bill
O'Neill, head of wealth management research at UBS. "You have to
see an improvement."
Among commodities, gold was a tad higher at $1,230.05
per ounce, steadying after touching a one-week low on Wednesday.
U.S. crude futures advanced 0.6 percent to $92.88 a
barrel, rebounding from a five-week low hit overnight after data
showed a large build-up of stockpiles at the U.S. benchmark
Brent crude gained 0.8 percent to top $108 per
barrel, though copper prices, highly sensitive to the
economic outlook for top consumer China, tumbled 1.2 percent to
$7,256.25 on its way to a two-week low.
"I'm a bear on copper prices - I think $7,000 is a more
sustainable level," said Helen Lau, a senior commodities analyst
with UOB Kay Hian in Hong Kong.
"The dollar will continue to strengthen because of U.S
tapering (stimulus withdrawal), and China's economic growth is