Europe stocks, bonds rise as ECB holds rates

LONDON (BLOOMBERG) - European shares rose with Spanish and Italian government bonds, while Standard & Poor's 500 futures pared declines, as investors looked to the European Central Bank for indications that monetary policy will remain supportive after it kept interest rates unchanged.

The Stoxx Europe 600 Index rebounded from its lowest level in 15 months, while Standard & Poor's 500 Index contracts pared losses of as much as 1 per cent. Chinese equities fell even after the People's Bank of China injected the most cash via open- market operations since 2013. Russia's ruble fell to a record as Brent extended a 12-year low.

Volatility has coursed through financial markets in 2016 and at least 40 equity markets around the world with a total value of US$27 trillion are now in bear territory as turmoil in China shows no signs of abating and the selloff in crude oil deepens. 

Amid these threats to the ECB's inflation target, speculation is growing that President Mario Draghi might hint at his briefing Thursday that support in addition to the 1.5 trillion-euro (S$2.3 trillion) bond-buying program and negative interest rates is in the pipeline.

"There's no reason to be overweight equities, but the ECB could have a reassuring impact today," said Francois Savary, the chief investment officer of Prime Partners SA, a Geneva-based investment manager. "Markets need to hear that the bias of monetary policy remains accommodative. We'll get no lasting rebound without some fundamental news that really shifts sentiment."

The Stoxx 600 added 0.7 per cent at 12:53 p.m. in London, after rising as much as 1.2 per cent and falling 0.2 per cent. Commodity producers led gains.

Italian banks rebounded, with Banca Monte dei Paschi di Siena SpA jumping 31 percent as European Union officials signaled they're ready to speed up the process of setting up an Italian bad bank.

Deutsche Bank AG slid 6.4 per cent after Germany's biggest lender forecast a loss for the fourth quarter.  Futures contracts on the S&P 500 slipped 0.3 per cent, indicating U.S. equities may extend declines after the index fell to a 21-month low on Wednesday.

The MSCI Emerging Markets Index slid 0.8 per cent, poised for the lowest close since May 2009. The gauge is down 13 per cent this year and trades at 10.1 times its 12-month projected earnings, the least since March 2014.