Global stocks up on ECB, Greece hopes, euro falls

NEW YORK: Global stocks rebounded on Thursday on rising hopes Greece will abandon plans to hold a referendum over a euro-zone bailout, but the euro faltered on fears of slowing economic growth in the region.

The European Central Bank cut interest rates in a surprise move that buoyed stock markets in Europe, but the euro fell against the dollar after ECB President Mario Draghi said tensions in financial markets could slow growth.

The euro slid to $1.3727, down 0.2 percent.

US stocks bounced following an industry report that showed the pace of growth in the vast US services sector slowed modestly in October to its lowest level in three months as new orders declined.

Trading was volatile as markets turned on headlines. The Greek government teetered on the brink of collapse over its referendum plans as turmoil in the ruling party cast doubt on whether Prime Minister George Papandreou can survive a confidence vote.

"Everybody is totally focused on any sensational headlines from Europe. The market was sideswiped by the (ECB) cut this morning and Draghi has dug the knife in further by indicating Europe is heading to a mild recession," said Dean Popplewell, chief FX strategist at Oanda in Toronto.

"Everyone is now nervous ahead of non-farm payrolls tomorrow," Popplewell said, referring to US employment report for October to be released on Friday.

The ECB's rate cut increased investor appetite and helped lift Wall Street after the open. Comments by US Fed Chairman Ben Bernanke on Wednesday, who tried to soothe market tensions by promising to do more if necessary to boost the US economy, also added to the bullish mood.

European and global stock indexes turned higher after earlier, sharp losses, while other assets seen as risky also gained.

MSCI's all-country world index rose 0.3 percent and the FTSEurofirst 300 index of top European shares was up 1.3 percent.

The Dow Jones industrial average was up 68.68 points, or 0.58 percent, at 11,904.72. The Standard & Poor's 500 Index was up 4.42 points, or 0.36 percent, at 1,242.32. The Nasdaq Composite Index was up 4.99 points, or 0.19 percent, at 2,644.97.

"It is a politics-driven market. With the violent intraday moves, the best way to play it is with very short-term, highly-leveraged trackers or options, but with tight stop losses," said David Thebault, head of quantitative sales trading, at Global Equities.

The ECB cut its main interest rate by 25 basis points to 1.25 percent as the euro zone's escalating debt crisis eclipsed worries over persistently high inflation.

Financial shares in Europe surged, with AXA up 6.3 percent and UniCredit up 3.0 percent.

Oil prices edged higher, pushing toward $110 a barrel.

Brent crude for December was up 58 cents at $109.92 a barrel. US crude was up 82 cents to $93.33 a barrel.

US Treasuries fell to session lows after the ECB rate cut.

Benchmark 10-year Treasury notes expanded their loss to 20/32, pushing their yields up to 2.06 percent.

Copyright Reuters, 2011