Wall Street clings near record highs; report on ECB lifts euro

Wed Aug 27, 2014 4:27pm EDT
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By Richard Leong

NEW YORK (Reuters) - The euro rebounded from a 13-month low on Wednesday after a report suggested the European Central Bank might not introduce more stimulus next week while major U.S. stock indexes were little changed, with the S&P 500 clinging near the 2,000 milestone.

Reuters in a report on Wednesday cited ECB sources who said the bank is unlikely to embark on quantitative easing (QE), similar to what the bond purchases Federal Reserve has done, at its meeting next week unless August inflation figures due on Friday signal the 18-nation bloc is moving closer toward deflation.

Traders said the report cooled earlier expectations of ECB action at its Sept 4 meeting after ECB President Mario Draghi's call for more policy action last week, reviving the euro and lifting German bond yields from their earlier lows.

"The euro and Bund yields backed off their low levels after a news story that the ECB may not announce QE at next week’s meeting," said Justin Lederer, a Treasury strategist at Cantor Fitzgerald in New York. "But it's not like they are not expected to do it at all even though it might not be next week."

Bets that the ECB is on the brink of injecting more stimulus into the euro zone economy had earlier driven the euro to its weakest level against the dollar in 13 months. The speculation also drove the region's government bond yields to record lows and spurred a rise in European share prices for a third straight day.

Among key commodities, Brent crude oil rose on reduced supply from a large oil field in the North Sea due to additional maintenance.

Gold firmed as the dollar retreated against a basket of major currencies.

Investors were wary about piling into equities and other risky assets after Ukraine accused Russian forces of a new military incursion across its border.   Continued...

Traders work on the floor of the New York Stock Exchange August 26, 2014. REUTERS/Brendan McDermid