Stocks, Treasuries gain on European bond-buying hopes

By Michael Connor

NEW YORK (Reuters) – European and U.S. equities rose on Wednesday, lifted by news reports that the European Central Bank will announce a massive bond-buying program to boost the euro zone’s flagging economy.

U.S. Treasury yields declined and the euro rose against the dollar after news reports that the ECB, which will hold a policy meeting on Thursday, plans to buy roughly 50 billion euros ($ 58 billion) in bonds per month for at least one year.

The reported amount of the purchases “at a minimum, meets expectations,” Dan Greenhaus, chief strategist at BTIG, said. “If this means the ECB is considering, or would implement, an open-ended form of (quantitative easing), well then that’s a whole other ball game.”

The FTSEurofirst 300 index <.FTEU3> that tracks European stock markets turned positive on the news reports and was last ahead 0.4 percent.

U.S. stocks opened down, in part because International Business Machines Corp issued a disappointing outlook, but rose after the reports on the ECB bond-buying program.

Wall Street’s Dow Jones industrial average <.DJI> was last up 32.78 points, or 0.19 percent, to 17,548.01, the S&P 500 <.SPX> was ahead 9.35 points, or 0.46 percent, to 2,031.9, and the Nasdaq Composite <.IXIC> was up 20.83 points, or 0.45 percent, to 4,675.67.

The MSCI World Index <.MIWO00000PUS> of equities markets was up 0.6 percent.

U.S. Treasury debt prices, especially those of long-term issues, rose as the European bond-buying program was seen fueling demand for Treasuries that already pay much higher yields. Thirty-year bonds yielded 2.3729 percent, reflecting a price gain of 19/32.

The euro hit a nearly one-week high against the dollar, at $ 1.168, after the media reports and was last at $ 1.1602, according to Thomson Reuters data.

The expectations of ECB action – with the potential stimulus seen at around 600 billion euros ($ 690 billion), according to a Reuters poll – kept euro zone core bond yields near record lows.

ECB Governing Council member Ewald Nowotny told a Euromoney conference in Vienna that the bank’s Thursday meeting would be interesting but one “shouldn’t get over excited about it.”

The Japanese yen rose more 1 percent against the U.S. dollar after the Bank of Japan left policy unchanged. Though the decision by the BoJ not to expand its stimulus package had been widely expected, some had bet on a surprise move as inflation targets looked elusive.

Bets on euro zone monetary stimulus also reached the commodities markets, with gold climbing above $ 1,300 an ounce for the first time since August before settling back to $ 1,289.70. The prospect of looming deflation and increased market volatility were cited as factors supporting demand for bullion.

Oil prices edged up, with Brent crude holding above $ 49, following a recent heavy sell-off that led Total’s chief executive to say the French energy major plans to cut capital spending by 10 percent this year.

(Reporting by Michael Connor in New York; Editing by Leslie Adler)