January 22, 2015 / 4:00 PM / 4 years ago

GLOBAL MARKETS- Shares rise, euro slides as markets cheer ECB QE plan

* ECB takes QE plunge with plan worth more than 1 trillion euros

* European shares hit seven-year high, Wall Street seen higher

* Euro slides, bond yields hit new lows

* Canadian dollar close to six-year low after BOC rate cut

By Marc Jones

LONDON, Jan 22 (Reuters) - European shares climbed to a seven-year high and the euro fell to an 11-year low on Thursday, as world markets cheered the European Central Bank’s plans for a stimulus programme worth more than 1 trillion euros.

The ECB’s quantitative easing programme — printing money to buy euro zone government bonds — along with its existing schemes will pump 60 billion euros a month into the euro zone economy. It is set to run from March until September next year.

Market expectations for QE had been high before the meeting. Mario Draghi and his colleagues came through, although the plans included a lengthy list of caveats that will mean euro zone states will have to shoulder much of the risk themselves.

Although the programme is now set to run to September next year, Draghi made clear it could be extended if the bank felt that was necessary.

“Markets will cheer the fact that the ECB is going to be buying bonds on this scale, which is ahead of expectations and with a hint of being open-ended,” said Aberdeen Asset Management portfolio manager Luke Bartholomew. “But the decision that the ECB will only shoulder 20 percent of the debt on their balance sheet is odd.”

The pan-regional FTSEurofirst index climbed 0.8 percent as Scandinavia, the UK and eastern European markets rose in tandem. Another round of robust U.S. data also helped the S&P 500 and Dow Jones Industrial open around 0.2 percent higher.


Riskier assets have been supported by central banks seeking in recent weeks to fight deflation and avoid losing what is fast becoming a global currency war.

Canada’s dollar slid to a six-year low after it cut rates on Wednesday. Denmark cut rates for the second time this week on Thursday.

As the euro slumped to an 11-year nadir of $1.1455, an index that measures the dollar against six of the world’s main currencies rose. However, the dollar also fell against Japan’s yen.

The ECB’s move to QE may be its last bullet. Hoping to stimulate growth, it has already cut interest rates to record lows, begun buying private-sector assets and funnelled hundreds of billions of euros of cheap loans to banks.

Many expect the euro will eventually reach parity with the dollar, but low global inflation is now pushing back bets on when the U.S. will raise rates. That’s on top of worries about Greece’s elections at the weekend, where the anti-bailout party Syriza leads the polls.


Europe’s central banks have been strained by the prospect of ECB QE. The Swiss National Bank had to remove its cap on the value of the franc last week, Denmark has pushed rates deeper into negative territory and two British rate setters at the Bank of England have dropped calls for a rate hike.

Denmark’s crown tumbled after the central bank cut its key rate to a record low -0.35 percent from -0.20 percent.

The Australian and New Zealand dollars suffered deep losses overnight as Canada’s rate cut fuelled speculation the Reserve Bank of Australia could soon follow.

The Aussie last fetched $0.8106, having weakened more than 1 percent in Sydney. That had pulled it closer to a six-year low of $0.8033 set earlier in the month. The kiwi tumbled to a 2 1/2-year low of $0.7516.

Among commodities, oil and gold prices were bouncing around as hopes the ECB’s action would boost growth contended with the threat a stronger dollar, which would put pressure on products priced in dollars.

Brent and U.S. crude futures gave up earlier gains to fall to $49.19 and $47.50 per barrel

The dollar dipped to 117.52 on the yen. Japan’s central bank had also been in action earlier and signalled its resolve to hit its ambitious 2 percent inflation target. (Editing by Larry King)

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