Swedish quantitative easing surprise, Russia-Ukraine deal lift gloom

February 12
5:18 AM 2015

A surprisingly aggressive dose of monetary stimulus from Sweden's central bank on Thursday injected life back into world markets which had been numbed by the stalemate in talks between Greece and its euro zone creditors.

Stock markets across Europe reversed opening losses as investors welcomed the Riksbank's decision to cut interest rates below zero and buy government bonds.

They extended these gains after Russian president Vladimir Putin said Russia and Ukraine had agreed a ceasefire which will take effect from Feb. 15.

This came as the International Monetary Fund announced a new $40 billion four-year funding program for Ukraine.

The FTSEuroFirst index of 300 leading shares .FTEU3 rose 0.5 percent to 1,490 points, with France's CAC 40 .FCHI rising 0.6 percent to 4,707 points and Britain's FTSE 100 .FTSE 0.4 percent higher at 6,845 points.

Germany's DAX .GDAXI jumped 1.3 percent to 10,895 points.

Although seven hours of crisis talks in Brussels did not produce even a joint statement on the next procedural steps, investors were optimistic that negotiations between Greece and its creditors, resuming on Monday, will ultimately bear fruit.

"Markets went sideways for three days, and now some people are putting positions back on," said a broker in London.

Stock market investors also cited encouraging reports in what is one of the busiest days of the European earnings calendar. Shares in Swiss bank Credit Suisse (MLPN.P) and French car-maker Renault (RENA.PA) were among the leading gainers, both rising around 5 percent.

Earlier, MSCI's broadest index of Asia-Pacific shares outside Japan .MIAPJ0000PUS fell 0.5 percent as markets from Australia to China declined.

In currency markets, the euro was flat at $1.1330 EUR= having traded as high as $1.1353, and the Australian dollar fell 0.5 percent to $0.7685 AUD= after weak jobs data increased prospects for further easing by the Reserve Bank of Australia.

The Swedish crown slumped to a six-year low against the dollar after the country's central bank cut interest rates below zero and announced it would launch quantitative easing by buying 10 billion crowns of government bonds.

Investors had sought the safety of "core" government bonds, pushing the yield on German two-year and five-year debt to remarkable record lows of -0.23 percent and -0.06 percent apiece.

U.S. crude CLc1 was up 3 percent at $50.20 a barrel after dropping as much as 3 percent overnight, and Brent crude was up 2 percent at $55.73 LCOc1.

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