European shares once again neared multiyear highs in early
trading Tuesday, buoyed by expectations that the European Central
Bank will this week venture into uncharted territory by launching a
stimulus program aimed at spurring Europe's ailing economy.
In early trade, the Stoxx Europe 600 added 0.5%, while London's
FTSE 100 and France's CAC 40 climbed 0.3% and 0.4% respectively.
Germany's DAX 30 rose 0.3%, closing in on its all-time high scored
Monday.
Government bonds in many Southern European countries continued
to hover close to record highs too, driven by expectations that the
ECB will announce that it will begin buying sovereign bonds in an
effort to beef up its balance sheet.
"We expect the ECB to announce a program of around EUR500
billion-EUR750 billion of [European government bond] purchases and
our economists believe that the ECB will signal it will stay open
so long as inflation and inflation expectations remain unacceptably
low," Barclays strategists wrote in a note.
On Monday, French President François Hollande said in a speech
to business leaders at the Élysée Palace that he too expects the
ECB to announce that it will buy sovereign debt--a move that he
said "will provide significant liquidity to the European economy
and create a movement that is favorable to growth."
Strategists at Société Générale, meanwhile, said they anticipate
a program from the ECB that includes sovereign, agency, and
corporate bond purchases on Thursday.
"Given that a broad consensus expects a substantial QE plan to
confront deflation risk and aid a stalling economy, disappointing
the markets with the scope of the QE plan is a risk," they
said.
The euro remained under pressure against the dollar in the lead
up to Thursday's decision too, trading at around $1.1587 against
the dollar Tuesday.
Elsewhere in currency markets, the Swiss franc remained close to
parity with the euro after the country's central bank last week
shocked markets by scrapping its long-standing cap on the strength
of the currency.
In early trading the euro was at 1.02 francs--around 15% lower
than a week ago. Swiss stocks, which took a beating after last
Thursday's decision, continued to recover, with the SMI up by
around 1% in early trading. Swiss banks Credit Suisse Group AG and
UBS AG's shares edged higher too, but remained around 13% and 18%
lower than last week's levels.
Brent crude was around 1% lower on the day at $48.38 a barrel.
Gold rose 0.3% to $1,280.10 a troy ounce.
Write to Josie Cox at josie.cox@wsj.com
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