Global equity markets rally

European equities rallied and investor sentiment was lifted on Thursday by the perceived prospect of further stimulus by the European Central Bank and a slight recovery in oil prices, but the euro took a sharp dive to new nine-year lows.

The euro plunged as low as $1.1754 on expectations that the central bank could begin quantitative easing to prevent the eurozone from descending into deflation. It later edged back up to $1.1775, not far from the value it initially traded at in 1999, $1.1747.

"Optimism over more ECB stimulus may have helped equities but the prospect of further central bank easing was detrimental to the euro, which slid to a new nine-year low," Daniel Sugarman, a ETX Capital analyst, told the Reuters news agency.

Stocks up, euro down on ECB speculation

The ECB will decide on January 22 whether to begin buying government bonds with freshly printed money, but the Federal Reserve in the United States is poised to begin limiting its access to such funding.

These diverging policies - loosening monetary policy in the eurozone while the US tightens its own - as well as favorable US economic data showing a drop in new jobless benefits claims, have strengthened the dollar.

That buoyancy was palpable as Wall Street opened on Wednesday.

The Dow Jones Industrial Average was up 1.06 percent in the first five minutes of trading to 17,771.37. The S&P 500 jumped 0.98 percent to 2,045.73, while the Nasdaq Composite tech index rose 0.93 percent to 4,693.69.

The gains compounded a swell in shares on Wednesday, which ended a five-day losing streak that had been catalyzed by unease over the Greek economy and the prospect of the debt-laden country exiting the eurozone.

European gains

Asian equity markets were also mostly up on the US data and ECB speculation: Tokyo rose 1.67 percent; Hong Kong's by 0.65 percent; Sydney climbed 0.52 percent; and Seoul jumped 1.11 percent. Shanghai, however, fell 2.39 percent.

Back in Europe, London's benchmark FTSE 100 surged 1.57 percent to 6.520.45 points in afternoon trading, as investors remained unfazed by the Bank of England's decision to hold interest rates at record-low levels of 0.50 percent.

One of the biggest winners on the London Stock Exchange was the retailer Tesco, whose shares jumped as much as 15 percent on the news that it would be enacting a broad restructuring plan following months of profits warnings and an accounting scandal.

Frankfurt's blue-chip DAX 30 won 1.74 percent to 9,683.65 points and the CAC 40 in Paris soared 2.57 percent to 4,218.38 as France observed a day of mourning after Islamists stormed the office of the satirical newspaper Charlie Hebdo, killing 12.

cjc/msh (Reuters, dpa)