Asian stocks rally as ECB chief vows to preserve euro

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Asian stocks rally as ECB chief vows to preserve euro

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Tokyo rose 1.26pc, Hong Kong jumped 1.56pc, Sydney climbed 0.78pc, and Shanghai rallied 0.40pc.

27 July,2012 10:06 am

Asian markets rallied and the euro held on to strong gains after the head of the European Central Bank said it would do whatever it takes to save the under-pressure single currency.The comments from bank president Mario Draghi sent shares in Europe and the United States surging, while the borrowing rate for Spain fell back below the seven percent danger level.Tokyo rose 1.26 percent, Hong Kong jumped 1.56 percent, Sydney climbed 0.78 percent, Shanghai was 0.40 percent higher and Seoul rallied 1.68 percent.Draghi, speaking at a business conference in London, said the ECB is ready to do whatever it takes to preserve the euro. And believe me it will be enough.Draghis announcement sparked talk that the bank would carry out additional bond buying to push yields lower in Spain, where the rising cost of borrowing has been stoking fears of another bailout, and Italy.The yield on Madrids benchmark 10-year bonds fell to 6.899 percent, which although still high is well down from the levels approaching eight percent seen earlier this week. Anything above seven percent is considered too high for governments to be able to service their debts over the long term.The ECB, which is mandated only to guard price stability, has so far played a significant, but closely proscribed, role in tackling Europes debt and growth crisis.Markets had already been lifted by the prospect of the soon-to-be launched European Stability Mechanism rescue fund being granted a banking licence, which would allow it to exchange bonds for ECB cash, boosting capacity without nations having to provide additional funds.These comments are very positive, Shane Oliver, head of investment strategy and chief economist at AMP Capital, told Dow Jones Newswires.It has always been within the power of the ECB to bring an end to financial panic sweeping Europe.Global traders welcomed the remarks. On Wall Street the Dow jumped 1.67 percent, the S&P 500 rose 1.65 percent and the Nasdaq gained 1.37 percent. And in Europe the Paris CAC 40 leapt 4.07 percent while Frankfurts DAX 30 rose 2.75 percent and the FTSE in London was up 1.68 percent.Italian shares surged 5.62 percent and the Spanish market, which this week sank to a more than nine-year low, soared 6.06 percent.The euro had surged in New York to a two-week high of $1.2330 at one point while also advancing to 96.02 yen.In early Asian trade it bought $1.2279 and 96.13 yen. The single currency had dived earlier this week to a 12-year low of 94.08 yen and two-year trough of $1.2050.The dollar was at 78.28 yen in Asia Friday, compared with 78.30 in New York.Adding to the rise in Seoul was Samsung Electronics announcement that it had posted a record net profit of 5.19 trillion won ($4.53 billion) in the second quarter to the end of June, thanks to smartphone sales.Oil prices were also higher. New Yorks main contract, light sweet crude for delivery in September, was up nine cents to $89.48 a barrel and Brent North Sea crude for September delivery gained five cents to $105.31.Gold was at $1,613.50 at 0210 GMT from $1,613.90 late Thursday.