Global stocks rise on hopes of ECB action, Brent falls below $50

By Richard Leong

NEW YORK (Reuters) – U.S. and European stock prices rose on Wednesday on hopes the European Central Bank would embark on more stimulus soon to avert deflation in the euro zone, as Brent oil slipped below $ 50 a barrel for the first time in nearly six years.

The stunning drop in energy prices since mid-2014 due to sluggish global demand and a supply glut tipped euro zone inflation into negative territory for the first time since 2009. Euro zone annual inflation in December was -0.2 percent, lower than expected and far below the ECB’s medium-term target of just under 2 percent.

Growing prospects the ECB might roll out a long-awaited bond-buying program to prevent the crippling effect of a downward price spiral helped knocked the euro to a nine-year low and bond yields in several euro zone members to record lows.

“We think they will deliver quantitative easing (bond buying) in the first quarter, and that will offer support to European stocks,” said Robert Parkes, an HSBC strategist in London.

The FTSEurofirst 300 index of top European shares (.FTEU3) jumped 1 percent to 1,336.64 after three losing sessions. [.EU]

The rebound in European shares revived Wall Street. On Tuesday, the Standard & Poor’s 500 stock index marked a fifth straight day of losses, the longest such streak in 13 months.

The Dow Jones industrial average (.DJI) was up 149.27 points, or 0.86 percent, to 17,520.91, the S&P 500 (.SPX) was up 18.21 points, or 0.91 percent, to 2,020.82 and the Nasdaq Composite (.IXIC) was up 40.91 points, or 0.89 percent, at 4,633.65.

Tokyo’s Nikkei (.N225) ended flat at 16,885.33. [.T]

The MSCI world equity index , which tracks shares in 45 nations, rose 0.47 percent to 405.93.

The ECB meets on Jan. 22 but may be reluctant to act aggressively before Greece’s general election on Jan. 25, a vote which could raise the prospect of the country’s exit from the euro zone if the left-wing Syriza party wins.

As they await developments in Europe, traders have been reacting to the continuing slide in oil prices which has shown no bottom in sight. Brent crude (LCOc1) fell more than 2 percent earlier in the day to dip below $ 50 a barrel for the first time since early 2009 before rebounding back above $ 51. [O/R]

Anxiety about deflation and the future of the euro zone stoked more selling of the euro, which fell as low as $ 1.18085 (EUR=EBS), the lowest since 2009. It last traded at $ 1.18185, down 0.6 percent on the day on the EBS trading system. [FRX/]

The dollar also fared better against the yen, rebounding from earlier losses. It was last up 1 percent at 119.64 yen (JPY=EBS).

The greenback climbed on encouraging data on U.S. trade and private job growth and higher U.S. yields.

U.S. 10-year Treasury note yields rose to 2 percent, while 30-year yields were up 4 basis points at 2.568 percent , rebounding from an all-time trough of 2.443 percent hit on Tuesday. [US/]

Longer-term borrowing costs in Japan, Germany, France, the Netherlands, Austria, Belgium, Finland, Canada and Australia all reached record lows.

Yields on German bonds of maturities of up to 5 years were negative and the 10-year yield touched as low as 0.44 percent.

(Additional reporting by Jamie McGeever in London; Editing by Anna Willard and James Dalgleish)