Asia: ECB speculation sends stocks surging, euro sinks

[HONG KONG] The European Central Bank's hint at fresh stimulus measures for the stuttering eurozone economy sent Asia stock markets and emerging currencies surging Friday, while the euro came under further selling pressure.

Regional investors were set to end another week on a positive note, extending an October rally that has been fuelled by hopes for more monetary easing from key central banks, including in the United States, China and Japan.

The gains come after global markets suffered their worst quarter in four years during July-September, owing to worries about the Chinese economy.

After its latest policy meeting on Thursday, the ECB unveiled no new measures but its head Mario Draghi said: "The degree of monetary policy accommodation will need to be re-examined at our December meeting."

The comment inflamed talk the bank will ramp up its already vast bond-buying scheme - essentially printing more cash - in a bid to fan chronically weak inflation and kick-start torpid growth.

With the prospect of more euros flooding the market, the single currency plunged Thursday to US$1.1111 and 134.10 yen in New York, well down from US$1.1339 and 135.65 yen in Asia earlier in the day.

And on Friday in Tokyo the unit dipped to US$1.1103 and 134.01 yen.

It also fuelled a rally in equities, with Frankfurt and Paris surging more than two percent while all three main indexes on Wall Street also enjoyed healthy gains.

The upbeat mood filtered through to Asia as Tokyo ended the morning 2.35 per cent higher, Hong Kong added 1.40 percent, Sydney gained 1.79 per cent and Seoul tacked on 1.32 per cent.

"Mario Draghi and his elves at the ECB practically confirmed there will be an early Christmas present in order for the European economy on 3 December," Evan Lucas, a market strategist at IG, said in an email to clients.

"In short, all options are on the table for the ECB, also meaning the Bank of Japan and the Fed are now live events as well."

Speculation the Federal Reserve will put off an expected interest rate hike until next year has gained traction over the past month as bank policymakers fret over the weak global economic outlook.

A growth slowdown in China and ongoing troubles in Japan's economy have also exacerbated talk that those countries will soon announce more measures, feeding a rally in financial markets.

The likelihood that monetary policy will remain more accommodative for borrowers supported high-yielding, riskier, assets, such as emerging market currencies.

In morning trade, the Malaysian ringgit soared 1.31 per cent and Indonesia's rupiah gained 0.90 per cent. The Australian dollar and Thai baht each put on 0.4 per cent while the Taiwan dollar was up 0.33 per cent.

South Korea's won surged 1.15 per cent, with news that the country's economy grew more than expected in July-September also providing strong support.

AFP