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GLOBAL MARKETS-Stocks, bonds cheer bumper ECB cash handout

Published 23/03/2017, 11:36 pm
© Reuters.  GLOBAL MARKETS-Stocks, bonds cheer bumper ECB cash handout
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* Risk assets rally after bumper ECB cash take up

* Dollar steady, focus on Trump policy plans

* Slump in iron prices continues at slower pace

* Oil prices nudge higher, gold slips

By Marc Jones

LONDON, March 23 (Reuters) - Euro zone stocks and bonds rallied on Thursday as banks snapped up almost quarter of a trillion euros of interest-free European Central Bank cash in what the ECB hopes will be the last outing for one of its main crisis-fighting tools.

Banks took a whooping 233 billion euros ($251.31 billion) at the ECB's TLTRO (targeted long-term refinancing operation), over 100 billion more than had been forecast, fanning hopes of another spending stampede by market bulls. pan-European FTSEurofirst 300 .FCHE rose 0.25 percent with Frankfurt .GDAXI , Paris .FCHE and Milan .FCHI up as much as 0.6 percent and Wall Street ESc1 set to open higher ahead of a key test of Donald Trump's policymaking ability. .N

Highly indebted Italy, Spain and Portugal and euro zone bank also saw their bonds rally, as analysts bet that they would be the first items on the shopping list of many of the 474 banks that had taken the ECB money.

"That (TLTRO) was a policy designed for extraordinary times, we are not in them now," said Nick Gartside, JP Morgan Asset Management's international CIO for fixed income.

Markets showed no lasting reaction to Europe's latest terror attack, which for the second time in 10 years had seen the region's financial centre, London, targeted. attacks, including in France, Germany and Belgium last year as well those in London and Madrid more than 10 years ago, have made little impact on economic confidence or financial markets in isolation.

Sterling GBP=D3 started steady and then climbed swiftly above $1.25 as more-resilient-than-expected UK retail sales data proved that Britain's consumers aren't being cowered by looming Brexit negotiations and rising inflation. /FRX

The dollar .DXY was also creeping higher with attention firmly whether or not Trump will get his highly-publicised healthcare changes to roll back 'Obamacare' passed by U.S. lawmakers. FRX/

"What we are getting this week is a questioning of how much of the risk rally is predicated on future Trump policy," said Michael Metcalfe, head of global macro strategy at State Street Global Markets.

"There are concerns that this vote (on healthcare reform) will be a litmus test of how much fiscal expansion he can get through."

After losing 3.5 percent in the past 10 days, the dollar was roughly steady at 111.05 yen. It gained as much 0.1 percent to $1.0786 per euro and hovered 0.1 percent higher against the basket of currencies used to measure its broader strength.

IRON SLAM

In commodities markets, the focus remained on iron ore prices in China as they followed up a 16 percent slump on Wednesday by falling to their lowest in more than two months. came from a continued slide in steel and simmering concerns about demand in China, the world's top consumer. The most-traded iron ore on the Dalian Commodity Exchange DCIOcv1 closed down 1.9 percent at 580.50 yuan ($84).

The risk rally elsewhere saw gold XAU= dip however and oil rebounded, after touching its lowest since November overnight on data that showed U.S. inventories, already at a record high, grew by far more than forecast. said oil had found technical support and was being pushed up as traders took new long positions after the overnight low, but supply concerns kept the gains in check.

U.S. crude CLc1 added 0.75 percent to $48.40 a barrel and

global benchmark Brent LCOc1 climbed 0.7 percent to $50.99.

With several major currency pairs steadying after a week of losses for the dollar, the biggest FX mover of the day was Australia's dollar AUD= , down half a percent on the back of nerves in China's money market and a slump in prices for its iron ore exports.

The New Zealand dollar NZD= was steady at $0.7046 after its central bank held interest rates at a record low 1.75 percent, and reiterated it would remain there for a "considerable" period of time. TEST

MSCI's broadest index of Asia-Pacific shares outside Japan .MIAPJ0000PUS had advanced 0.2 percent overnight.

Japan's Nikkei .N225 closed 0.2 percent higher too, as a weaker yen offset a political scandal over the relationship of Prime Minister Shinzo Abe and his wife with a Japanese nationalist education group that bought state-owned land. CSI 300 .CSI300 rose early on hopes that index compiler MSCI may include A-shares in its indices, but those gains were lost as money began flowing out of the mainland market through link to the Hong Kong exchange.

Wall Street futures were pointing to modest gains, though it was likely to be tense going ahead of the Trump policy test.

On Wednesday the Nasdaq .IXIC jumped 0.5 percent and the S&P 500 .SPX closed 0.2 percent higher, while the Dow Jones .DJI was flat, after all three touched their lowest levels in about five weeks earlier in the session. .N

Trump has been trying to rally support for his plan to repeal the 2010 Affordable Care Act, Democratic former president Barack Obama's signature healthcare legislation.

Trump and Republican leaders of the House of Representatives have said they were making progress in their efforts to win over conservative Republicans who have demanded changes to the legislation. They plan a vote on the bill, Trump's first major legislation since he took office, later on Thursday. he can't push through the bill, it would further damage stocks. It also raises the risk of his other policies, like tax cuts, being delayed," said Masafumi Yamamoto, chief forex strategist at Mizuho Securities in Tokyo.

For Reuters Live Markets blog on European and UK stock markets see reuters://realtime/verb=Open/url=http://emea1.apps.cp.extranet.thomsonreuters.biz/cms/?pageId=livemarkets ($1 = 0.9271 euros)

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