Euro sinks to 11-1/2-year low, bonds gain after ECB

NEW YORK: The euro fell to an 11-1/2-year low against the dollar on Thursday as U.S. and euro zone bond prices rose, after the European Central Bank spelled out its 1 trillion-euro stimulus plan that begins next Monday.

European stock prices rose to seven-year highs in advance of the ECB's latest effort to jump-start the struggling euro zone economy, while U.S. equities edged higher as investors awaited direction from the government's monthly labor report due out on Friday.

ECB President Mario Draghi outlined the central bank's quantitative easing program at a press conference following a scheduled policy meeting. He left the door open for more bond purchases beyond September 2016.

"It will have a material effect on a lot of European exporters. We'll see a lot of benefits on the cost side for producers," Xavier Smith, portfolio manager of the Center Global Select Fund in New York said of the ECB bond purchase plan.

The ECB upgraded its growth outlook for the euro zone to 1.5 percent for 2015. That still trails a 2.8 percent pace seen for the United States.

Brent oil prices ended a tad lower in the absence of a deal with world powers on Iran's nuclear program. An agreement could loosen restrictions on Iran to sell its oil, exacerbating a global supply glut.

The rise in European stock prices was limited by the prospect of an economic slowdown in China, with mining companies falling on the outlook.

Beijing announced a 7 percent growth target for the year and signaled that the lowest rate of expansion for a quarter of a century is the "new normal."

The euro slumped below $1.100 for the first time since September 2003. It was last down 0.5 percent at $1.1024. Against the yen, it was down 0.1 percent, at 132.46 yen .

In contrast, the dollar strengthened to an 11-1/2-year peak against a basket of currencies ahead of Friday's U.S. payrolls report. If the data shows further improvement in wages and job growth, it will reinforce an expectation that the U.S. Federal Reserve will raise interest rates later this year.

The dollar index <.DXY> was up 0.45 percent at 96.398.

U.S. and euro zone prices rose. Benchmark 10-year U.S. yield dipped to 2.10 percent, while the Italian and Portuguese counterparts and slipped to record lows. [US/] [GVD/EUR]

The Dow Jones industrial average <.DJI> ended up 38.82 points, or 0.21 percent, to 18,135.72 the S&P 500 <.SPX> rose 2.51 points, or 0.12 percent, to 2,101.04, and the Nasdaq Composite <.IXIC> added 15.67 points, or 0.32 percent, to 4,982.81. [.N]

The pan-European FTSEurofirst 300 index <.FTEU3> ended up 0.8 percent, while Tokyo's Nikkei <.N225> closed up 0.3 percent. [.EU] [.T]

The MSCI world equity index <.MIWD00000PUS>, which tracks shares in 45 nations, edged up 0.03 percent at 429.31.

Brent crude settled down 7 cents, or 0.1 percent, at $60.48 a barrel. U.S. crude settled down 77 cents, or 1.49 percent, at $50.76. [O/R]

Spot gold prices fell $1.89 or 0.16 percent, to $1,197.56 an ounce. [GOL/]- Reuters