Stocks rally on European central banks' comments

AMSTERDAM — World stocks shrugged off worries over political turmoil in Egypt and extended early gains Thursday on optimism that easy monetary policy from central banks in Europe is set to continue for some time to come. U.S. markets were closed for Independence Day.

The biggest gains were in Britain, where the Bank of England surprised markets after its first monetary policy meeting held under new governor Mark Carney, saying it views inflation pressures as temporary. That suggests it will keep its policies loose for the foreseeable future.

Meanwhile, the European Central Bank kept rates at record low rates, with President Mario Draghi for the first time saying they will remain there "for an exended period of time."

By mid-afternoon trading in Europe, Britain's FTSE 100 index was up 2.9 percent to 6,410.89. Germany's DAX rose 1.6 percent to 7,954.87, and France's CAC 40 was up 2.1 percent to 3,779.68.

The central bank statements contributed to strong declines in the euro and British pound against the dollar. Looser monetary policies tend to weaken a currency as returns on investments are kept low. The euro fell 0.9 percent to $1.2896, while the British pound fell 1.3 percent to $1.5079.

Earlier in Asia, Hong Kong's Hang Seng index was the strongest gainer, rising 1.6 percent to 20,468.67. China's Shanghai Composite rose 0.6 percent to 2,006.10.

Tokyo's Nikkei 225 bucked the trend, slipping 0.3 percent to 14,018.93, despite remarks from Bank of Japan Governor Haruhiko Kuroda that the country's economy is headed for recovery.

Mike McCudden, head of derivatives at Interactive Investor, noted that while physical exchanges are closed in the U.S., futures are still trading, and they indicate Wednesday's rally on the back of economic data has continued, with Dow Jones Industrial Index futures now trading above 15,000. The index closed at 14,988.50 Wednesday.

"Whether this can be sustained will clearly be reflected by what's happening on a global basis," he said in a note on markets. "The situation in Egypt remains hugely sensitive, whilst resurgent eurozone woes could knock sentiment."

Investors around the world were also keeping a close watch on the oil price, which has passed $100 per barrel for the first time since May 2012 due to Wednesday's events in the Middle East: Egypt's military overthrew Morsi, the country's first democratically elected president, after he defied calls to resign despite the demands of millions of protesters.

Egypt is not an oil producer but its control of the Suez canal — one of the world's busiest shipping lanes, which links the Mediterranean with the Red Sea — gives it a crucial role in maintaining global energy supplies. Oil has eased somewhat from its Wednesday highs and was down 41 cents to $100.83.

Over the past few weeks, markets have sputtered amid speculation that the U.S. Federal Reserve might taper off its policy of buying $85 billion in bonds every month to keep interest rates low and encourage spending.

But on Wednesday, unemployment and jobs data out of the U.S. were just right for stocks, analysts said: good enough to restore confidence that the U.S. economic recovery is continuing, but not so good that the Fed is likely to pull back on stimulus.

"We have had a period of extreme volatility, and now we have some settling going on," said Lorraine Tan, director at Standard & Poor's equity research in Singapore. "I think there's a realization that the reaction may have been overdone."

The dollar gained 0.2 percent against the yen, passing the 100 yen mark to 100.06 yen.

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Kay Johnson in Bangkok and Pan Pylas in London contributed to this report.

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