Fall in oil, ECB cash hopes support euro, European shares
By Richard Hubbard
LONDON (Reuters) - A fall in oil prices and the European Central Bank's looming cash boost for banks lifted the euro and shares on Wednesday, although some investors worried that the benefits of a second injection of cheap money may be short-lived.
Brent crude oil futures slipped to around $123 a barrel from highs above $125.50 late last week, ending a surge that had dampened demand for other commodities and slowed the gains in global stock prices.
Lower oil prices were also supporting U.S. equities, with stock index futures pointing to a higher open on Wall St.
Markets expect European banks to borrow about 500 billion euros ($670 billion) of the cheap funds on offer from the ECB on Wednesday, although forecasts range from 200 billion to 750 billion euros.
"The euro has priced in a cash injection of 500 billion euros and anything above 600 billion will be risk positive and push the euro higher," said Ankita Dudani, G-10 currency strategist at RBS Global Banking.
On the other hand, a take-up of less than 400 billion will hurt risk appetite and could drag the euro lower, she added.
The euro stood at $1.3444, up 0.3 percent on the day, trading not far from a near three-month peak of $1.3487 set on Friday. The U.S. dollar was unchanged against the yen at 80.50 yen, below a nine-month high of 81.66 yen hit on Monday.
European stock indexes pushed higher as bank shares gained on expectations for a good take-up of the ECB money, which is designed to improve their balance sheets and encourage lending activity to boost the wider economy. Continued...