(European stocks bounce but gains cut by German court ECB ruling)
* Euro and euro zone bonds pushed lower by court ruling
* Oil markets jump and on longest run of gains in nine months
* China, Japan markets closed for holidays
By Marc Jones
LONDON, May 5 (Reuters) - Stock markets snapped a three-day losing streak on Tuesday and oil was on its longest run of gains in nine months as moves to ease major economies out of their coronavirus lockdowns lifted sentiment.
It was a turnaround from Monday, when bickering between Washington and Beijing triggered fresh selling, but traders have become used to sudden changes of direction in recent months and there were more to handle in Europe, too.
The pan-European STOXX 600 initially rose nearly 2% as a more than 6% jump in Brent prices and news that Total wasn’t cutting its dividend gave a 5% boost to battered oil stocks.
Things then started to get choppy again though when Germany’s top court ruled that the European Central Bank’s quantitative-easing programme “partially violated” the country’s constitution.
The euro and the region’s government debt fell, too, although the court also said the ECB’s measures didn’t amount to monetary financing - where a central bank bankrolls the government - something banned in Germany. The ruling also didn’t apply to the bank’s new coronavirus PEPP support programme.
“In practice, this should not restrict the ECB too much,” said Holger Schmiedling, chief economist at Berenberg. “However, Karlsruhe (German court) has emphasized that there are limits to bond purchases. This could make it more difficult for the ECB to expand PEPP.”
In addition to the German court angst, euro zone producer prices fell the most in March since the 2008 financial crisis, Eurostat data showed.
The drop was more than expected as the COVID-19 pandemic reduced demand for energy. Prices at factory gates in the 19 countries sharing the euro fell 1.5% month-on-month in March and 2.8% year-on-year.
The euro traded down 0.65% at $1.0835, and a sell-off in bond markets pushed Italy’s ultra ECB-sensitive government yields up past 1.90% again.
That meant the U.S. dollar index pushed higher for a second consecutive day, though the jump in oil meant the big petrocurrencies like Canada’s dollar, Norway’s crown and Russia’s rouble were all stronger.
With countries including the United States, Germany, France, Spain, Italy, Nigeria, India, and Malaysia all tentatively easing lockdowns, the hope for oil producers is that the worst of the demand slump is now over.
Brent crude rose 7.8% to $29.32 a barrel, up for a sixth straight day, and U.S. crude rose 10% to $22.43 a barrel for its fifth consecutive rise.
Energy giants Exxon Mobil and Chevron were also leading gains in premarket Wall Street trading where first quarter earnings reports were still rolling in and ISM’s non-manufacturing data was due later
Analysts at Commonwealth Bank of Australia said the structure of the oil price rises, with bigger gains in nearer-dated contracts, suggested expectations of more production cuts and a restoration of fuel demand later this year.
They added, though, that this meant prices were unlikely to recover their huge declines since the start of the year.
“From a very top-down perspective, markets are reacting positively to measures governments and central banks have taken,” said Alistair Wittet, a European equity portfolio manager at Comgest.
“But we are still to see what the full economic consequences of all this will be... the real test will be when the markets start opening up and governments and central banks start withdrawing.”
Reporting by Marc Jones, editing by Larry King and Nick Macfie