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updated: 9/7/2012 9:06 AM

World markets remain reassured by ECB bond-buying

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Associated Press

LONDON -- A bond-buying plan from the European Central Bank continued to buoy financial markets on Friday while worse-than-expected U.S. jobs data lifted expectations that the Federal Reserve will back another monetary stimulus.

Financial markets have reacted positively to the ECB's program, unveiled Thursday by ECB president Mario Draghi, because it lowers the possibility that the euro currency union will break up, at least in the near-term. Stocks have risen strongly, as has the euro and the price of oil, while the costs of borrowing for countries like Spain and Italy has become more manageable.

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The centerpiece of the plan -- the ECB's most ambitious response yet to Europe's debt crisis -- is a commitment to buy unlimited amounts of short-term bonds from euro countries that request help. The plan is meant to ease the financial pressures on Spain and Italy, the third- and fourth-largest economies in the eurozone, by giving them time to reduce their debt and reform their economies.

"Yesterday's actions by the ECB ... look like they could well buy Europe some additional time to sort out the problems that have plagued the single currency for the last three years," said Michael Hewson, senior market analyst at CMC Markets.

In Europe, Germany's DAX was up 0.7 percent at 7,221, while the CAC-40 in France rose the same rate to 3,536. The FTSE 100 index of leading British shares was 0.3 percent higher at 5,792.

In the U.S., the Dow Jones industrial average was up 0.1 percent at 13,309 while the broader S&P 500 index rose 0.3 percent to 1,436. On Thursday, the S&P soared to its highest level since January 2008, while the Dow hit its highest mark since December 2007.

Stock markets were little affected by figures showing the U.S. economy created only 96,000 jobs in August. That was below market expectations for a 130,000. The July increase was also revised down to show a 141,000 gain instead of 163,000.

Despite a surprise fall in the unemployment rate to 8.1 percent associated with a smaller labor force, the worse-than-anticipated payrolls figures failed to dent stocks as they have boosted expectations that the U.S. Federal Reserve will enact another monetary stimulus after its next policy meeting next week.

However, the dollar fell sharply after the figures and the euro was 1.1 percent higher at $1.2760. Previous monetary easing by the Fed has resulted in stocks advancing and the dollar falling.

"Bad economic news is good and the rally in risk assets should continue," said Andrew Wilkinson, chief economic strategist at Miller Tabak & Co. who remains "optimistic" that the Fed will next week unleash another stimulus.

In Asia, Japan's Nikkei 225 index surged 2.2 percent to close at 8,871.65. Hong Kong's Hang Seng jumped 3.1 percent to 19,802.16 -- its biggest one-day percentage gain since Jan. 17.

South Korea's Kospi bolted up 2.6 percent to 1,929.58. Australia's S&P/ASX 200 rose 0.3 percent to 4,325.80.

Mainland Chinese shares soared. The benchmark Shanghai Composite Index jumped 3.7 percent to 2,127.76 and the smaller Shenzhen Composite Index added 3.8 percent to 891.53.

Oil prices continued to rebound alongside equities. Benchmark oil for October delivery was up 30 cents to $95.83 a barrel in electronic trading on the New York Mercantile Exchange.

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