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GLOBAL MARKETS-ECB's Greek bond ban hits Europe, Ukraine woes slam currency
February 5, 2015 / 10:40 AM / 3 years ago

GLOBAL MARKETS-ECB's Greek bond ban hits Europe, Ukraine woes slam currency

* European stocks trim losses after ECB ban on Greek bonds
    * Euro regains some ground after sharp drop
    * Oil steadies after dropping 9 pct overnight
    * Ukraine's currency slumps 30 percent after moves
    * Wall Street set to open higher after ok jobless claims

    By Marc Jones
    LONDON, Feb 5 (Reuters) - A European Central Bank decision
to strike Greek bonds off its list of accepted collateral caused
European shares and bonds to fall on Thursday, though losses
were being cut and Wall Street looked set for a positive start.
    As the ECB's move ratcheted up pressure on Greece's new
anti-austerity government, the pan-European FTSEurofirst
 share index fell 0.4 percent after the euro 
tumbled overnight. 
    Greek bank shares plunged over 20 percent and the
country's short-term debt yields surged to almost 20 percent
. Both then pared their losses, leaving stocks
down just 7 percent.. 
    Futures markets pointed to 0.5-0.6 percent gains on Wall
Street, after encouraging jobless claims data were
released before Friday's non-farm payrolls figures. 
    In Europe, the ECB's move upped the stakes in a standoff
between the rest of the euro zone and Greece, where a new
government wants to rewrite its aid-for-reform agreements. 
    Greece's central bank will now have to provide the country's
banks with billions of euros of emergency funding. The ECB's
decision needs to be approved by its Governing Council, but some
at the bank sound as if they are preparing to play hardball.
    "ELA (Emergency liquidity assistance) should only be awarded
for the short term and to solvent banks," Germany's ECB member
and Bundesbank chief, Jens Weidmann, told the business newspaper
Boersen Zeitung in an interview.
    "I am of the view that we should apply strict standards with
ELA. If that should have consequences for financial stability,
then politicians must live up to their responsibilities."
    The euro had dropped sharply after the ECB's move
late on Wednesday, but it recovered on Thursday, helped by the
strongest rise in German industrial orders since early 2008
    The euro gained almost 1 percent on the dollar to put it
back to $1.1480, where it had traded before the Greek bond ban.
It also climbed more than 1 percent against the Swiss franc
, as traders speculated that the Swiss National Bank
was again buying euros to weaken the franc. 
    Oil markets  steadied, after slumping nearly 10
percent in the previous session when the United States reported
another rise in crude stockpiles, which had heightened worries
about global oversupply. 
    Brent crude rose 83 cents to $54.99 a barrel, having
fallen more than a dollar intra-day earlier. U.S. crude 
added 60 cents to $49.05.
    "It will be some time yet before we see any sustained trend
reversal in oil prices," said Carsten Fritsch, analyst at
Commerzbank. "There's no basis for a sustained recovery at the
    The Ukraine conflict was also back in focus. Russia accused
the United States of trying to tear Ukraine away from it and
warned any supply of U.S. arms to Ukraine would pose a danger to
Russia's national security. 
    The warning came as Ukraine's hryvnia slumped 34
percent after its central bank - which has been running out of
reserves - scrapped daily auctions that have been propping up
the currency.  
    It also hiked interest rates 5.5 percentage points to 19.5
percent, even though the economy is expected to face a recession
this year.
    "There is still panic on the market, connected with ongoing
fighting," central bank governor Valeriia Gontareva said at a
news conference.    
    Asian stock markets had been weighed down by Greek worries
overnight, and China's move on Wednesday to ease its policy had
pressured the region's currencies. 
    Japan's Nikkei fell 1 percent after rising 2 percent
the previous session. Shares in South Korea, Malaysia and
Singapore also fell and Chinese shares  lost 1
    The dollar was little changed against the yen at 117.35 yen
 and a touch softer against a basket of six major
currencies. Safe-haven gold dipped to $1,262 an
ounce, after adding 0.8 percent on Wednesday.
    "We think the Greek issue will likely stir things up for a
little while longer in the markets, which is why we think gold
should benefit, likely at the expense of equities," INTL FCStone
analyst Ed Meir said in a note. 

 (Reporting by Marc Jones; Editing by Larry King)

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