UKX FTSE 100 Index

By Paul J. Davies 

European and U.S. stocks advanced Thursday, as the European Central Bank said it expected to leave interest rates in negative territory for a longer period.

The Dow Jones Industrial Average opened about 27 points higher, while the S&P 500 and Nasdaq Composite Index both added about 0.1%. The Stoxx Europe 600 gained 0.3% in midday trade. Germany's DAX ticked up 0.3% while the U.K. FTSE 100 climbed 0.4%.

The ECB said in its policy statement Thursday that it was keeping interest rates unchanged for now, and extended the period during which it expected to leave rates on hold from the end of 2019 to at least through the first half of 2020.

The euro rose against the dollar to trade 0.4% higher. The yield on 10-year German government bonds yielded minus 0.217% shortly after the policy statement, having earlier hit a record low of minus 0.238%, according to Tradeweb.

U.S. oil prices had dropped more than 22% below their April peak in recent days as growth concerns and a rise in U.S. production led to a big rise in U.S. crude inventories. Wider fears about the global economy slowing have hit Brent crude prices, too, but not by as much. However, banks have maintained their forecasts for higher prices this year and WTI rebounded Thursday, rising 0.25% at $51.81 on Thursday, while global benchmark Brent crude was 0.8% higher at $61.10.

The U.S. 10-year Treasury yield edged down further to 2.110% from 2.119%

The collapse of merger talks between Renault and Fiat Chrysler hit shares of both companies. Renault was hit hardest, tumbling 7.8% in early trade, while its existing partner Nissan was down 1.7% in Japan. Fiat Chrysler shares slipped 0.2% in Italy, but Renault's French rival Peugeot was up 2.3% on hopes that it may get a tie-up with Fiat instead.

Fears about the impact of President Trump's various standoffs with the U.S.'s leading trade partners on the health of the global economy have hurt stock markets in recent weeks. But U.S. indexes extended a rebound on Wednesday, with the S&P 500 rising 0.8%. That came after the Federal Reserve signaled it could cut rates to boost economic growth and the central bank's "beige book" reported modest growth in April and May.

That momentum didn't carry over into Asian markets Thursday. Shares in Shanghai were down 1.2%, while those in Tokyo were flat.

The U.S. and Mexico were set to enter the second day of negotiations on Thursday that could avert tariffs. President Trump's spat with Mexico is likely to mean an immediate spike in car prices, according to some economists, which are one of the biggest exports into the U.S. from its southern neighbor. That, in turn, would hurt demand.

"While the exact price elasticity of vehicle demand is hard to quantify, it is possible to imagine a 25% tariff bringing down overall vehicle demand by 3m+ units, or an 18%+ reduction," said Emmanuel Rosner, an economist at Deutsche Bank.

Italian yields also fell despite the decision by European authorities to declare that the country is in breach of its debt reduction agreements, which could heighten political tensions between the country and the bloc. Italian 10-year yields were down to 2.474% from 2.489%.

Gold rose 0.6% to $1,341.70 an ounce.

Write to Paul J. Davies at paul.davies@wsj.com

(END) Dow Jones Newswires

June 06, 2019 09:48 ET (13:48 GMT)

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