(Adds U.S. market open, byline, dateline; previous LONDON)
* Stocks jump on growing expectations of central bank
stimulus
* Dollar gains on U.S. housing data, euro's decline
* German bond yields bounce off lows after budget report
* Oil edges higher on stock market gains
* Growing hopes of stimulus from central banks
* Graphic: World FX rates in 2019 http://tmsnrt.rs/2egbfVh
By Herbert Lash
NEW YORK, Aug 16 (Reuters) - The dollar strengthened while
U.S. and European stocks surged on Friday amid growing
expectations the European Central Bank will cut interest rates
to stimulate the economy and after China said it plans to boost
disposable income to spur consumption.
Benchmark U.S. Treasury yields rose from three-year lows but
government bond yields in the euro area hovered near record lows
on heightened expectations of aggressive ECB easing soon to
address growing concerns about recession risks.
The dollar hit a two-week high against the euro as
expectations of ECB stimulus weighed on the single currency
while bullish data showing a jump in U.S. homebuilding permits
to a seven-month high also helped lift the greenback.
The euro pared some losses after Der Spiegel reported
Germany's right-left coalition government would be prepared to
ditch its balanced budget rule and take on new debt to counter a
possible recession. German government bond yields rebounded sharply but later
pared some of the gains. The Finance Ministry declined to
comment on Spiegel's report.
The rebound in equity markets buoyed investor sentiment,
though it is hard to say the recent rout has found a floor
despite cheaper prices, said Yousef Abbasi, global market
strategist at INTL-FCStone Financial in New York.
U.S. banks are likely to get cheaper because European banks
are likely to do so if the ECB doesn't put together a credible
off-set plan for further negative rates for banks, he said.
"That's the concern. Despite some equities looking
attractive the macro concern is giving investors a reason to
pause and not so aggressively buy the dip," Abbasi said.
MSCI's gauge of stock performance in 47 countries
.MIWD00000PUS gained 1.21% and its emerging market .MSCIEF
rose 0.73%. In Europe, the FTSEurofirst 300 .FTEU3 index of
leading regional shares jumped 1.22%.
The Dow Jones Industrial Average .DJI rose 315.64 points,
or 1.23%, to 25,895.03, the S&P 500 .SPX gained 42.1 points,
or 1.48%, to 2,889.7 and the Nasdaq Composite .IXIC added
133.39 points, or 1.72%, to 7,900.01. The euro earlier slid to $1.1090 EUR= , shy of a two-year
low it set two weeks ago, on reports the ECB's Olli Rehn had
suggested Thursday that a significant easing package was needed
in September.
The dollar index .DXY rose 0.04%, with the euro EUR=
down 0.09% to $1.1096. The Japanese yen JPY= weakened 0.21%
versus the greenback at 106.36 per dollar.
The German bund was set for a fifth straight week of
declines, Italy's 10-year bond yield was poised for its biggest
weekly fall since mid-2018 and Spanish 10-year yields were on
track for their biggest weekly fall since 2016 ES10YT=RR .
The benchmark 10-year U.S. Treasury notes US10YT=RR fell
14/32 in price to push yields up to 1.5741%. Crude oil prices recovered from two days of declines after
data on Thursday, showing a rise in U.S. retail sales, helped
ease recession concerns. A bearish outlook from OPEC capped
gains. Brent crude LCOc1 rose 42 cents at $58.65 a barrel while
U.S. crude CLc1 traded break-even at $54.47 a barrel.
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GRAPHIC-Global assets in 2019 http://tmsnrt.rs/2jvdmXl
GRAPHIC-World FX rates in 2019 http://tmsnrt.rs/2egbfVh
GRAPHIC-MSCI All Country World Index Market Cap http://tmsnrt.rs/2EmTD6j
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