* ECB announces fresh stimulus measures
* Euro STOXX 600 up 0.7% to highest since July
* Euro zone bond yields fall, euro weakens
* MSCI's world equity index touches highest since Aug. 1
* U.S. and China ease trade war tensions
* Yuan rises to three-week high
* Graphic: World FX rates in 2019 http://tmsnrt.rs/2egbfVh
(Adds Draghi comment)
By Tom Wilson
LONDON, Sept 12 (Reuters) - European stocks climbed on
Thursday to their highest in seven weeks and bond yields tumbled
as the European Central Bank's new stimulus measures and mutual
concessions by the United States and China in their trade
dispute buoyed riskier bets.
The Euro STOXX 600 .STOXX gained 0.7% after the ECB
approved new stimulus measures to hit its highest level since
July 25. Bourses in Paris .FCHI and Frankfurt .GDAXI gained
0.8%, rebounding strongly after giving up early gains before the
ECB statement.
The ECB cut rates deeper into negative territory and
restarted its programme of bond buying, known as quantitative
easing, with a formulation that suggests purchases could go on
for years. "The Governing Council reiterated the need for a highly
accommodative stance of monetary policy for a prolonged period
of time," ECB head Mario Draghi said at a news conference after
its policy meeting. The policy package added wind to investors' sails, already
boosted by signs of detente in the U.S>-China trade war.
In mutual concessions, U.S. President Donald Trump had moved
to delay an increase in tariffs on Chinese goods by two weeks,
while China exempted some U.S. drugs and other goods from
tariffs. [ MSCI's world equity index .MIWD00000PUS , which tracks
shares in 47 countries, was up 0.1% after rising to its highest
since Aug. 1. It was on course for its seventh straight day of
gains, its best winning streak since early June.
Wall Street futures gauges ESc1 NQcv1 gained between
0.3%-0.7%.
The ECB cut its deposit rate to a record low of -0.5%,
promised that rates would stay low for longer and said it would
restart bond purchases at a rate of 20 billion euros a month
from Nov. 1.
With other central banks easing monetary policy, Germany at
risk of recession and euro zone governments doing little to prop
up the bloc, ECB policymakers were forced to deploy most of
their remaining tools.
Euro zone bond yields fell and the euro weakened 0.7% as a
result.
"ELEPHANT IN THE ROOM"
Market players generally praised the package, though some
said there were doubts about its impact. Others said there were
outstanding questions about the details of the package - not
least the composition of the ECB's bond buying programme.
"The question remains whether this will be enough to get
growth and inflation back on track as the real elephant in the
room is fiscal policy," wrote Carsten Brzeski, chief economist
at ING Germany.
Though ECB President Mario Draghi had all but promised more
support, the central bank's exact moves were far from certain.
A new round of bond buying, the bank's most potent weapon,
was seen as an outside option, not least because policymakers
from Germany to France were sceptical about the move.
"The nominally open-ended nature of the QE programme is
better than expected," said Arne Petimezas, an analyst at AFS, a
brokerage in Amsterdam.
"But the purchase volumes are still relatively low, and it
will take about a year before excess liquidity is back at its
prior peak".
After the ECB decision, the U.S. Federal Reserve is expected
to cut rates next Wednesday and the Bank of Japan and Swiss
National Bank next Thursday also may ease.
Trump, who has called for a further cut on rates by the Fed,
tweeted his support for the ECB's rate cut.
After the ECB's move, Germany's 10-year bond yield fell 8
basis points to -0.64% DE10YT=RR after the ECB's statement,
while 30-year debt fell almost 20 bps at one point DE30YT=RR .
Euro zone government bonds had earlier risen from record
lows reached a week ago on doubts that the ECB would resume
asset purchases. The euro EUR=EBS , after initially rising, dropped sharply
to as low as $1.0955 as investors digested news of the rate cut
and relaunch of QE. The single currency had hit a 28-month low
earlier this month of $1.0926, and has shed 3.5% since June.
The dollar rose against a basket of currencies and was last
up 0.2% at 98.568 .DXY.
The optimism over trade had earlier emboldened risk-hungry
investors, with the Chinese yuan CNH= gaining 0.4% against the
dollar, touching a three-week high of 7.0855.
Stephen Gallo, European head of FX strategy at BMO Capital
Markets, said he was surprised by the rebound, particularly in
the yuan pushing beyond 7.10 to the dollar.
For Reuters Live Markets blog on European and UK stock
markets, please click on: LIVE/
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HIGHLIGHTS-Draghi comments at ECB press conference nL5N2633RY
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