GLOBAL MARKETS-Shares, euro rise on ECB action hopes, Bunds dip

by on July 27, 2012 7:31 am BST

Fri Jul 27, 2012 3:31am EDT

* World stocks up 0.4 pct

* Euro edges higher

* Bunds slip back, Spanish debt yields ease

By Simon Jessop

LONDON, July 27 (Reuters) – World stocks extended gains and
the euro edged higher on Friday as markets bet on new
intervention from the European Central Bank to help stop debt
market pressure on peripheral euro zone countries from
spiralling out of control.

ECB President Mario Draghi’s promise on Thursday to do
whatever it takes within the bank’s mandate to defend the single
currency prompted a rise in shares and the euro, as well as a
fall in German Bund prices and an easing in yields on Spanish
bonds. All those trends continued on Friday.

At 0702 GMT, world stocks were up 0.5 percent,
while blue-chips in the euro zone climbed 0.3

The euro was up 0.1 percent at $1.2289, Bund futures
were down 25 ticks to 143.76 and 10-year bond yields in Spain,
in the frontline of the debt market attack, eased to 6.9

Draghi’s remarks were short on detail but some people
speculated that the ECB could announce after its policy meeting
next Thursday that it will start buying bonds again under its
Securities Market Programme (SMP).

“Mr Draghi’s comments have intensified the interest leading
into next week’s ECB meeting where the market is now expecting,
at a minimum, a further 25 basis point (interest) rate cut, with
the hopes of some SMP intervention for good measure,” Cameron
Peacock, Market Analyst IG Markets, said in a trading note.

However, the ECB has not bought bonds for months under the
programme which has drawn criticism of its effectiveness.

The bank could also “raise the bar” for the U.S. Federal
Reserve, which meets a day before the ECB, said Peacock. Recent
poor data in the world’s largest economy has left many in the
market hoping for signs the Fed would do more to stimulate

Hopes for more action from the major central banks also
underpinned gains in a range of commodities that would benefit
from increased demand following any liquidity boost, with
U.S. crude oil up 0.6 percent and copper up 0.8