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"There is hope of an interest rate cut by 25 basis points (form the ECB)," said Neil Marsh, strategist at Newedge.
"If there was a 25 bps cut today, which I think is highly unlikely, then we'll see quite strong market performance thereafter. If they give a hint of a rate cut possibly coming in July then I think we will see markets still move higher. If they don't do anything and there is no real suggestion of any further cuts, I think the market will probably sell off."
Ahead of the meeting, banks - which are most directly exposed to the euro zone crisis through their bond holdings and loan books, and are also among the best placed to benefit from any central bank stimulus - outperformed .
Royal Bank of Scotland
Miners also gained, capitalising on an across the board rise in metals prices, including gold, silver and copper. If global central banks act to stimulate growth, that should boost demand for metals, to the benefit of the sector.
UPGRADE LIFTS MAN
Man Group
"We downgrade EPS (earnings per share) but believe Man is now at the end of its downgrade cycle," Citigroup strategists said in a note.
However, Man Group's rally is not expected to stop it from being the sole stock demoted from the FTSE 100 in the latest quarterly index review, due after the market close on Wednesday. The review is based on closing prices from last Friday.
Vodafone
Overall ex-dividend factors chopped 13.72 points off the blue chip index, with food and retail group Associated British Foods
(Reporting By Toni Vorobyova; Additional Reporting by John Hopkins; Editing by Susan Fenton)
Global stocks, euro gain on central bank hopes - ibtimes.co.uk
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"Risk markets find that reassuring because there haven't been that many accommodative signals coming out of the ECB in recent weeks."
The chatter was enough to spur buying in world stocks, which have been hit hard of late and lost more than 11 percent between April 27 and Tuesday as the euro zone's debt crisis appeared to worsen. The sharp slide in stocks was seen as overdone by some.
The MSCI World Equity Index jumped 2 percent for its biggest daily gain since December. The MSCI Emerging Equity Index gained 1.9 percent, rebounding from a six-month low hit on Monday.
On Wall Street, the Dow Jones industrial average was up 216.95 points, or 1.79 percent, at 12,344.90. The Standard & Poor's 500 Index was up 22.61 points, or 1.76 percent, at 1,308.11. The Nasdaq Composite Index was up 57.58 points, or 2.07 percent, at 2,835.69.
The European Central Bank resisted pressure to provide immediate support for the euro zone's ailing economy by holding interest rates steady at 1 percent. But in a later statement, Draghi noted "increased downside risks to the economic outlook" and saw annual inflation falling below 2 percent in early 2013. The comments supported hopes for more accommodation down the road.
A similar tone was struck by Atlanta Fed President Dennis Lockhart, who said the U.S. central bank may need to consider additional monetary easing if a wobbly U.S. economy falters or Europe's troubles generate a broader financial shock.
Fed Chairman Ben Bernanke testifies before the U.S. congressional Joint Economic Committee on Thursday and could provide hints on the possibility of further monetary easing. The Group of 20 economies is scheduled to meet later this month.
"We could well see easing taking place throughout many of the G10 countries," said Ian Stannard, an executive director at Morgan Stanley. "We believe that quantitative easing from the Fed is also very much back on the table."
Markets were also supported by signs of urgent moves by Germany and the European Union to find ways to rescue Spain's troubled banks.
Spain, the euro zone's fourth-biggest economy, said on Tuesday it was effectively losing access to credit markets due to prohibitive borrowing costs.
COMMODITIES RALLY
Prices on U.S. Treasuries fell for the third day in a row after the benchmark 10-year yield hit an historic low last week. The 10-year U.S. Treasury note was down 25/32, the yield at 1.6558 percent.
The euro gained 0.8 percent to $1.2550, well off the near two-year low of $1.2286 set on Friday, as a broad rally in risky assets sent investors scrambling to cover bets against the currency.
"Lack of negative news overnight and from Draghi prompted a short squeeze," said Michael Woolfolk, senior currency strategist at BNY Mellon in New York.
The dollar rose 0.5 percent to 79.16 yen.
Brent crude surged to an intra-day high of $101.39 a barrel before easing to settle at $100.64, up $1.80. U.S. crude climbed 73 cents to end at $85.02.
Gold rose more than 1 percent to $1,637 an ounce. Spot silver rose 4.2 percent to $29.69 an ounce, on track for its biggest one-day rise since late February, having touched its highest since May 8 at $29.94 an ounce.
German 10-year bond yields rose 12 basis points to 1.32 percent, bouncing off a record low of 1.127 percent hit last Friday as nervousness over Spain's finances prompted a surge in demand for safer assets.
Bund yields could rise further in coming sessions, especially if Spain passes a key test for investor demand for its debt at an auction on Thursday, strategists said.
Spanish 10-year bond yields were two basis points lower on the day at 6.29 percent, extending this week's fall to around 25 basis points.
(Additional reporting by Angela Moon, Chuck Mikolajczak and Nick Olivari; Editing by Dan Grebler)
MONEY MARKETS-ECB rate cut bets pared, still on the table - Reuters
* Short-term rates inch higher after Draghi speech
* Markets still discounting ECB rate cuts in 2012
* Bets may pile up again if Spanish, Greek worries remain
By Marius Zaharia
LONDON, June 6 (Reuters) - Short-term euro zone interest rates rose slightly on Wednesday after the European Central Bank failed to flag it was ready to ease monetary policy, but markets are still pricing in a large probability the bank will cut rates later this year.
The ECB kept its refinancing rate unchanged at a record low of 1 percent and the deposit facility at 0.25 percent and President Mario Draghi warned his bank cannot make up for other institutions' lack of action.
This disappointed markets, which had expected him to at least send out a signal that more easing was forthcoming.
"From the tone of it, as of today we cannot expect any significant measure in July because he looked very defiant and imperturbable - the ball is very much in the court of the politicians," BNP Paribas rate strategist Matteo Regesta said.
However, rate cut bets have not been taken off completely.
Regesta estimated that the forward overnight euro zone interbank EONIA rate markets - which moved 1-3 basis points higher across the 2012 curve after Draghi's speech - was still pricing in 24 percent probability that the deposit facility rate will be slashed in half in July.
For the end of the year, a December EONIA of just over 23 basis points discounted a 66 percent probability of that happening, compared to some 80 percent at the end of last week.
Euribor futures also sold off a few ticks after Draghi's speech, implying expectations for higher fixings of three-month Euribor rates in the future.
The December Euribor contact was 3 ticks lower on the day and also compared with levels seen earlier in the session at 99.43, implying a 0.57 percent Euribor fixing in the last month of the year versus Wednesday's 0.663 percent.
After May's ECB meeting, which also disappointed markets waiting for more central bank easing, the December contract sold off to as low as 99.29, but it was bought back in the past few days as rate cut bets have been put back on the table.
Analysts say the same thing could happen next month if the conditions that led to speculation the ECB could cut interest rates on Wednesday are still in place.
Tensions over Spain's stricken banking sector are rising and the risk that Greece could leave the euro zone after its June 17 election is perceived as high. This is hampering business sentiment and growth potential even in the euro zone's powerhouse Germany, as shown by recent data, strengthening the case for the ECB to act.
"(A rise in ECB easing bets) could happen again, it depends on developments in Spain - if they get help, how large recapitalisation needs for the banking system are," said Commerzbank rate strategist Benjamin Schroeder.
"Also there is no clear indication what the outcome (of the Greek election) would be."
"VERY DYSFUNCTIONAL"
Moody's cut the credit ratings of six German banking groups and Austria's three largest banks on Wednesday, giving a glimpse of how far the ramifications of a potential Greek exit from the euro zone might go.
Banks more than tripled their uptake of ECB dollar funding on Wednesday, the latest indication that some are finding it increasingly hard to source cash in the market.
Traders say three weeks is the longest period for which most banks are willing to lend in cash markets, and that's only to a select group of counterparties, also because they are dressing their books for the half-year turn.
In his post-meeting remarks, Draghi himself described interbank markets as "very dysfunctional".
Japan Stocks Rise, With Techs Among Gainers - FOXBusiness
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LOS ANGELES – Japanese stocks moved higher in early Wednesday trading, with a weaker yen, Wall Street gains and modestly upbeat semiconducter-sales data among factors helping to boost techs. The Nikkei Stock Average improved by 0.5% to 8,423 ...World stocks perk up ahead of ECB meeting - Yahoo Finance
BANGKOK (AP) -- World stock markets perked up Wednesday, as a meeting of the European Central Bank raised hopes for some type of action to ease the continent's debt and banking crisis.
The meeting of the ECB's governing council, to be held later in the day, gave hope to traders downcast by a dismal slew of economic data, including a disappointing U.S. jobs report and a monthslong slowdown in Chinese manufacturing.
European shares rose in early trading. The FTSE 100 in Britain, where markets were closed Monday and Tuesday for Jubilee celebrations, gained 1.5 percent to 5,336.86. Germany's DAX rose 1.9 percent to 6,084.43 and France's CAC-40 gained 2 percent to 3,045.93.
Wall Street appeared set for gains, with Dow Jones industrial futures rising 0.8 percent to 12,222 and S&P 500 futures adding 1 percent to 1,298.
Asian stocks, meanwhile, rose following the release of data Tuesday by the Institute for Supply Management that showed U.S. non-manufacturing activity edging up to 53.7 last month from an April reading of 53.5.
That is important because U.S. service companies employ roughly 90 percent of American workers — and it marked the 29th straight month of expansion for the sector.
But while a reading above 50 indicates expansion, analysts remained cautious about reading too much into the latest figure.
"Any improvement is good and growth is growth but 53.7 still falls short of the 55 mark that we've always regarded as the dividing line between earnest growth and aimless drifting," analysts at DBS Bank Ltd. in Singapore said in a report.
Japan's Nikkei 225 rose 1.8 percent to close at 8,533.53. Hong Kong's Hang Seng added 1.4 percent to 18,520.53. Australia's S&P/ASX 200 edged 0.3 percent up to 4,055.30.
Benchmarks in Singapore, Indonesia and Taiwan also moved higher, but those in mainland China fell. Markets in South Korea were closed for a public holiday.
Some analysts said investors were hanging on to hopes for action by central banks and other authorities to stimulate growth, including a new round of "quantitative easing" by the U.S. Federal Reserve. That's when the Fed buys Treasury bonds to drive interest rates lower.
"Right now what is keeping the market alive is just accommodative policies from governments around the world," said Lee Kok Joo, head of research at Phillip Securities in Singapore.
"If we look at market activity closely, the volume doesn't seem to be so strong. There are still a lot of people who are not believers yet who are just staying on the sidelines, waiting for clearer visibility."
That might come June 17, when Greece holds elections that could determine whether the country will leave the euro currency union. A messy exit from the currency bloc by Greece would be sure to roil financial markets.
Some traders also said a decision by the Reserve Bank of Australia on Tuesday to lower its benchmark interest rate by a quarter percentage point to 3.5 percent stoked hopes that central banks elsewhere would do the same.
Hong Kong-listed blue chip stocks performed strongly. China Mobile Ltd. rose 2.9 percent and Henderson Land Development Co. gained 4.9 percent. CNOOC, also known as China National Offshore Oil Corp., added 3.8 percent.
Japanese vehicle makers recouped ground lost in recent selling. Mazda Motor Corp. added 4.3 percent, Yamaha Motor Co. jumped 4.6 percent and Isuzu Motors Ltd. rose 3.9 percent.
Later Wednesday, the U.S. Federal Reserve will release its so-called Beige Book, a survey of businesses across the United States, and the Labor Department will release first-quarter productivity data.
Benchmark oil for July delivery was up 97 cents to $85.27 per barrel in electronic trading on the New York Mercantile Exchange. The contract rose 31 cents to settle at $84.29 in New York on Tuesday.
In currencies, the euro rose to $1.2516 from $1.2446 late Tuesday in New York. The dollar rose to 79.12 yen from 78.73 yen.
___
Follow Pamela Sampson on Twitter at http://twitter.com/pamelasampson
Stocks Rally on Fed Hopes; Dow Higher for 2012 - CNBC
Stocks were near session highs Wednesday, with the Dow and S&P 500 on pace to log their best one-day gains in 2012, amid growing hopes that central banks around the world will implement further measures to support the global economy.
The Dow Jones Industrial Average jumped more than 200 points, led by BofA [BAC Loading... () 
], after snapping a four-day losing streak in the previous session. The blue-chip index is on track to log its first two-day win streak since late April.
The S&P 500 and the Nasdaq rallied for a third day to move out of correction territory. The CBOE Volatility Index, widely considered the best gauge of fear in the market, fell below 23.
All 10 S&P sectors were trading in positive territory, led by financials and energy.
“The market’s rallying on anticipation there’s going to be some kind of QE3 or operation twist,” said Alan Valdes, director of floor operations at DME Securities, noting that volume is still on the lighter side. “Traders continue to be very leery right now and will continue to be until we see jobs growth and a housing turnaround…People think the Fed has unlimited fire power—they don’t!”
Growth in the U.S. economy picked up in April and May and hiring showed signs of a "modest increase,'' according to the Federal Reserve, in its latest Beige Book summary of national activity.
Meanwhile, Atlanta Fed President Dennis Lockhart said the central bank may need to consider further monetary easing if the economy falters or Europe's debt crisis triggers further shock. Lockhart's comments come ahead of Fed Chairman Ben Bernanke's testimony on Thursday on the heels of some dismal economic reports.
Earlier, the ECB held its key interest rate unchanged at 1 percent, which was largely expected, but stopped short of announcing any big measures to help the financial markets. The central bank's President Mario Draghi pledged the ECB will act in a timely manner on inflation. Draghi added he expects inflation to stay above 2 percent this year and to ease to between 1 percent and 2 percent next year.
"Bottom line, Draghi didn't bring the meat the market dogs were hoping for as he seems to be standing pat for now, likely waiting for more stress to envelope before announcing something new of substance," wrote Peter Boockvar, managing director at Miller Tabak & Co.
But European shares closed higher amid hopes for further stimulus to boost the euro zone.
Facebook [FB Loading... () ] was higher in choppy trading after JMP Securities started coverage of the social-networking giant with a "market outperform" rating and a $37 price target. The company closed below $26 a share in the previous session.
Meanwhile, Nasdaq OMX [NDAQ Loading... () ] said it plans to set up a $40 million fund to compensate some financial firms that lost money after Facebook's botched market debut on the exchange last month. The plan applies to sell orders at $42 or less that did not execute and buy orders at $42 executed but not confirmed.
Financials led the market rally with BofA posting its biggest rally this year. Morgan Stanley [MS Loading... () ] also jumped after news the firm was considering a partial sale of its commodities trading division. Citigroup [C Loading... () ] and JPMorgan [JPM Loading... () ] were also higher.
Groupon [GRPN Loading... () ] rallied after the daily-deal website's rating was raised to "hold" from "sell" at Stifel.
Oil prices rallied, while gold touched a one-month high to above $1,630 an ounce. Halliburton [HAL Loading... () ] turned lower after the oilfield-services company said its decline in margins from last quarter will twice what the firm had initially expected, due to fracking costs related to guar gum. Shares were temporarily halted earlier. Rivals Baker Hughes [BHI Loading... () ] and Schlumberger [SLB Loading... () ] also fell from their earlier highs following the news.
Chesapeake [CHK Loading... () ] jumped following a report that the energy company will be selling nearly all of its pipeline assets to in a deal worth more than $4 billion.
Tempur-Pedic [TPX Loading... () ] plunged more than 40 percent after the mattress maker slashed its full-year earnings and revenue outlook due to increasing competition in North America. This comes after Mattress Firm [MFRM Loading... () ] missed revenue expectations on Tuesday and handed in weak quarterly revenue estimates. Smaller rivals Sealy [ZZ Loading... () ] and Select Comfort [SCSS Loading... () ] also fell sharply.
Iron Mountain [IRM Loading... () ] surged to lead the S&P 500 gainers after the document storage company announced it will convert to a real estate investment trust. In addition, at least two brokerages boosted their price targets on the firm.
On the economic front, U.S. productivity fell more than expected at a 0.9 percent annual rate in the first quarter, according to the Labor Department. Mortgage applications gained last week, according to the Mortgage Bankers Association.
—By CNBC’s JeeYeon Park (Follow JeeYeon on Twitter: @JeeYeonParkCNBC)
Coming Up This Week:
THURSDAY: Bank of England announcement, jobless claims, Bernanke speaks, quarterly services survey, Fed's Lockhart speaks, Fed's Kocherlakota speaks, consumer credit; Earnings from Lululemon Athletica, JM Smucker
FRIDAY: International trade, wholesale trade, Fed's Kocherlakota speaks, Chesapeake annual meeting
More From CNBC.com:
Stocks, commodities, euro soar in broad risk rally - Reuters India
NEW YORK |
NEW YORK (Reuters) - World stocks soared 2 percent and the euro rallied on Wednesday on talk major central banks would act to bolster a slowing global economy.
Brent crude jumped above $100 a barrel, while gold hit a one-month high, leading a broad rally in the commodities sector. Silver soared 4 percent and copper gained 2 percent.
Analysts said markets were reacting to hints of more monetary accommodation from both the European Central Bank - though ECB President Mario Draghi dashed hopes of near term action - and the U.S. Federal Reserve.
U.S. stocks rallied and analysts said the market was ripe for a bounce back after a drop of more than 6 percent in the S&P 500 for May on fears the euro zone crisis was escalating.
Prices on U.S. Treasuries fell for the third day in a row after the benchmark 10-year yield hit an historic low last week.
"Markets have moved a lot and valuations in stocks and a number of the credit sectors are compellingly cheap and the valuation argument for Treasuries and bunds is very thin," said Robert Tipp, chief investment strategist for Prudential Fixed Income with $330 billion in assets under management. "If the Fed and the ECB offer reassurances that they will protect the system, you're likely to see higher stock prices and higher yields."
The European Central Bank resisted pressure to provide immediate support for the euro zone's ailing economy by holding interest rates steady at 1 percent. But in a later statement Draghi noted "increased downside risks to the economic outlook" and saw annual inflation falling below 2 percent in early 2013. The comments supported hopes for more accommodation down the road.
A similar tone was struck by Atlanta Fed President Dennis Lockhart who said the U.S. central bank may need to consider additional monetary easing if a wobbly U.S. economy falters or Europe's troubles generate a broader financial shock.
Fed Chairman Ben Bernanke testifies before the U.S. congressional Joint Economic Committee on Thursday and could provide hints on the possibility of further monetary easing. The Group of 20 economies is scheduled to meet later this month.
"We could well see easing taking place throughout many of the G10 countries," said Ian Stannard, an executive director at Morgan Stanley.. "We believe that quantitative easing from the Fed is also very much back on the table."
Markets were also supported by signs of urgent moves by Germany and the European Union to find ways to rescue Spain's troubled banks.
Spain, the euro zone's fourth-biggest economy, said on Tuesday it was effectively losing access to credit markets due to prohibitive borrowing costs.
"The bounce-back we are seeing over the last two days and today in particular really does make one think we've got the worst of the selloff behind us," said Peter Kenny, managing director at Knight Capital in Jersey City, New Jersey.
"Keep in mind, although a rally of this type is welcome, nothing has significantly changed," he said.
The Dow Jones industrial average .DJI was up 228.19 points, or 1.88 percent, at 12,356.14. The Standard & Poor's 500 Index .SPX was up 24.98 points, or 1.94 percent, at 1,310.48. The Nasdaq Composite Index .IXIC was up 61.65 points, or 2.22 percent, at 2,839.76.
The MSCI World Equity Index .MIWD00000PUS jumped 2.1 percent for its biggest daily gain since December. The pan-European FTSEurofirst 300 .FTEU3 index rose 2.2 percent.
COMMODITIES RALLY
The euro gained 0.9 percent to $1.2564, well off the near two-year low of $1.2286 set on Friday, as a broad rally in risky assets sent investors scrambling to cover bets against the currency.
"Europe closed and there was a squeeze," said Boris Schlossberg, director of FX Research at GFT in Jersey City, New Jersey.
The dollar rose 0.4 percent to 79.05 yen.
Brent crude surged to an intra-day high of $101.39 a barrel before easing to $101.20, up $2.36. U.S. crude climbed $1.64 to $85.93.
Gold rose more than 1 percent to $1,637 an ounce.
Demand for safe-haven government debt fell. The benchmark 10-year U.S. Treasury note was down 25/32, the yield at 1.6575 percent.
Prices of German Bund futures also fell.
Despite the rally in riskier assets, Germany was able to sell 3.98 billion euros of five-year government bonds at a record low yield of 0.41 percent as investors remained nervous about Spain's banks and the possibility of Greece leaving the euro.
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