Robust ECB loan take-up lifts shares, commodities

Wed Feb 29, 2012 8:12am EST
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By Richard Hubbard

LONDON (Reuters) - A substantial take-up of the European Central Bank's latest offer of cheap loans lifted stocks and commodities on Wednesday, driving demand for higher-yielding currencies at the expense of the euro, but worries over the region's debt crisis remain.

U.S. stocks were also poised to open higher on Wall St.

Around 800 banks in the euro area took 530 billion euros ($711.45 billion) at the ECB's second-ever offering of 3-year loans, essentially in line with market expectations.

The liquidity boost, which come to over a trillion euros when combined with a similar offering in late December, is expected to support demand for riskier assets like equities, commodities and peripheral European bonds.

"What the ECB has done through this program is it's removed the chances of something major collapsing in the banking system and that having an effect on the whole economy," said Mouhammed Choukeir, the chief investment officer at British private bank Kleinwort Benson.

"We're a bit more upbeat on risk as a result of this action by the ECB, but we're by no means thinking that the sovereign crisis in Europe is over," he added.

The loan tender helped the FTSEurofirst 300 .FTEU3 index of top European shares gain by 0.8 percent t 1,083.97 points, putting it back on track toward seven-month highs.

The MSCI's world equity index .MIWD00000PUS was up about 0.4 percent after Asian stocks rose to a seven-month high earlier in the day.   Continued...

A man walks past screens at the bourse in Madrid November 7, 2011. REUTERS/Andrea Comas