Global stocks jump, dollar gains on Fed, ECB outlooks

Thu Jan 8, 2015 4:16pm EST
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By Herbert Lash

LONDON (Reuters) - Global equity markets surged and the dollar hit a nine-year high on Thursday, lifted by the Federal Reserve's confidence in the U.S. economy and hopes of aggressive new stimulus in Europe.

Stocks on Wall Street rose 1.8 percent and European stocks jumped nearly 3 percent as investors set aside fears from a few days ago that tumbling oil prices point to a global slowdown.

Brent oil fell and U.S. crude traded flat, while prices for U.S. and German government debt fell on growing speculation the European Central Bank will launch a bond-buying program to combat slowing economic growth.

Stocks on Wednesday had snapped a five-day losing streak after strong private sector jobs data and as minutes from the most recent Federal Reserve meeting reassured investors the U.S. central bank was in no hurry to start raising interest rates.

In the latest sign of a strong U.S. economy, the number of Americans filing new claims for unemployment benefits fell last week and job cuts declined sharply in December, suggesting a tightening labor market.

In Europe, ECB President Mario Draghi said the bank's Governing Council stands ready to take unconventional measures if needed to stem a prolonged period of low inflation.

Coupled with the Fed's apparent conclusion that a global deflation threat and potential turmoil from plunging oil prices will not derail the U.S. recovery, stocks rose.

"The decline in the price in oil, sure it spoke volumes about potential headwinds for the global economy," said Andrew Wilkinson, chief market strategist at Interactive Brokers LLC in Greenwich, Connecticut. "But it seems as ever investors are more optimistic about the likely response from global central banks and that turned confidence around."   Continued...

Traders work on the floor of the New York Stock Exchange January 8, 2015. REUTERS/Brendan McDermid