Global stocks hit records as ECB fires bazooka, US stimulus enacted

·3-min read
The ECB fired its stimulus bazooka over the bow of those worried by rising government borrowing costs

US and European stock markets pushed higher on Thursday after the European Central Bank accelerated its stimulus bond buying and US President Joe Biden signed off on a massive pandemic aid package that also is expected to boost the global economy.

Biden signed the eagerly anticipated economic relief package, which includes direct payments for households, an extension of unemployment benefits and an array of other programs for small businesses and low-income families.

US shares were already on the rise following the ECB announcement, and the Dow Jones Industrial Average and S&P 500 closed at records, as did the Frankfurt DAX, while Paris's CAC 40 also set a new one-year high.

The legislation, which comes as the US coronavirus vaccination campaign accelerates, helped spark a "fear of missing out" among investors.

"We have so much good news about to hit us for the next two years, that any pullback is probably an opportunity," said Maris Ogg of Tower Bridge Advisors.

Some economists fear the federal largesse will catalyze a big jump in inflation, potentially compelling a sudden shift in Federal Reserve policy.

But Ogg views such fears as overblown, saying "there's still plenty of capacity in the world, and I doubt that we will have too much money chasing too few goods for very long."

IMF spokesman Gerry Rice said the US spending is expected to provide "significant positive spillovers" to the global economy as demand rises.

- Bond buying boost -

The ECB said after its monetary policy meeting that it would ramp up the pace of its pandemic emergency bond buying, in a clear bid to soothe market jitters about a rise in government borrowing costs and inflation.

While the ECB did not increase the overall amount of planned purchases, the announcement came as investor nervousness has pushed up yields on government debt and despite the central bank acknowledging inflation will likely run higher than expected in the short term.

"As soon as the statement was released, bonds rallied, causing yields to drop and stocks to hit new highs," noted market analyst Fawad Razaqzada at ThinkMarkets.

However, Razaqzada warned that stepping up bond purchases -- the favored tool of central banks to stimulate the economy since the global financial crisis of 2008 -- eventually could push inflation even higher and harm investors later.

Oil prices rose after OPEC lowered its demand forecast for the first half of the year, but modestly boosted the projection for all of 2021.

Crude prices have returned to pre-pandemic levels as OPEC and its allies have extended production limits.

- Key figures around 2200 GMT -

New York - Dow: UP 0.6 percent at 32,485.59 (close)

New York - S&P 500: UP 1.0 percent at 3,939.34 (close)

New York - Nasdaq: UP 2.5 percent at 13,398.67 (close)

EURO STOXX 50: UP 0.7 percent at 3,845.64 (close)

London - FTSE 100: UP 0.2 percent at 6,736.96 (close)

Frankfurt - DAX 30: UP 0.2 at 14,569.39 (close)

Paris - CAC 40: UP 0.7 percent at 6,033.76 (close)

Tokyo - Nikkei 225: UP 0.6 percent at 29,211.64 (close)

Hong Kong - Hang Seng: UP 1.7 percent at 29,385.61 (close)

Shanghai - Composite: UP 2.4 percent at 3,436.83 (close)

Euro/dollar: UP at $1.1982 from $1.1932 at 2220 GMT

Pound/dollar: UP at $1.3984 from $1.3928

Euro/pound: UP at 85.66 pence from 85.60 pence

Dollar/yen: UP at 108.53 yen from 108.38 yen

Brent North Sea crude: UP 2.4 percent at $69.56 per barrel

West Texas Intermediate: UP 2.3 percent at $65.91 per barrel