Global stocks, euro up as euro zone debt fears ease

Thu Jan 12, 2012 8:27am EST
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By Richard Hubbard

LONDON (Reuters) - The euro jumped and stocks rose as strong demand at auctions for Italian and Spanish government debt on Thursday eased fears over the region's debt crisis but markets are on watch for comments from the European Central Bank after it left interest rates unchanged.

U.S. stock index futures point to stocks rising on Wall Street after the well-received sovereign debt sales encouraged investors ahead of job market and retail sales data and expected to show the U.S. economy is steadily recovering.

Spain sold twice as much three-year debt as it needed and Italy paid less than it did a month ago on one-year securities at their first auctions of 2012 as cheap money lent to banks by the ECB in December fuelled demand for shorter term debt.

"Basically the only reason this has been taken down so well is abundant ECB liquidity and with another one coming up in February, just for now the market seems very complacent," said Michael Leister, strategist at DZ Bank in Frankfurt.

Spain's risk premium, the spread between yields on Spanish and German benchmark bonds, narrowed to its tightest level since January 3 after the auction results and the yield on its 10-year bonds eased to 5.14 percent, near the low for the year.

The yield on Italian 12-month bills fell to 2.735 percent, from the near 6 percent Italy paid to sell one-year paper at a mid-December auction and the lowest level since June 2011.

The shared currency moved up about 0.5 percent to $1.2770, after earlier bouncing off support at $1.2700. It had fallen as low as $1.26615 in New York on Wednesday.

As expected the ECB left its key interest rate unchanged at a record low 1.0 percent at Thursday's policy meeting as it pauses to assess the impact of back-to-back cuts and a slew of other measures unleashed late last year that are showing signs of helping fight the euro zone debt crisis.   Continued...