By Marc Jones
LONDON (Reuters) - European shares got a major lift while the euro and the region's bond yields fell on Tuesday after European Central Bank insiders told Reuters the bank was readying a plan to buy corporate bonds.
The move could start at the beginning of next year and though not the kind of full-scale government bond buying that markets have been angling for, it would be a major step up by the ECB as it battles a slowing euro zone economy.
European shares <.FTEU3> jumped immediately after the report, with Italian <.FTMIB>, French <.FCHI> and Spanish <.IBEX> stocks -- potentially the main beneficiaries of the ECB's actions -- leading the way among the main bourses as they surged 1.8 to 2.2 percent.
The euro tumbled to a session low of $1.2760
"There has definitely been an impact on the markets," said Luca Jellinek head of European interest rates strategy, at Credit Agricole.
"I don't know that buying corporate bonds really changes the underlying issues of low growth and low inflation, but any sign from the ECB that it will do more is a positive."
Traders had already been giving a tentative thumbs up to growth data from China earlier as world markets <.MIWD00000PUS> continued to recover from last week's heavy falls, although the data did not change the perception that the world's second-biggest economy will continue to slow.
China's economy grew 7.3 percent in July-September official Beijing data showed, slightly above the 7.2 percent forecast by analysts. However, it was the weakest for any quarter since the 2008/09 global financial crisis.
With the euro
The Australian dollar
"The euro is the major move," said Vasileios Gkionakis, global head of FX strategy at UniCredit in London. "We started the day with a fairly bearish mood on the dollar but that changed after we saw the headlines on the ECB (buying corporate bonds)."
EARNINGS
Europe's positive sentiment was expected to follow into U.S. trading, with U.S. futures pointing to early gains of 0.8 percent for the S&P 500
Gadget giant Apple
A breakdown of the earlier China data showed industrial output rose a better-than-expected 8.0 percent in September from a year earlier, up from August's six-year low of 6.9 percent growth.
However, fixed-asset investment and retail sales figures were weaker than expected. The Shanghai Composite index <.SSEC> slipped 0.4 percent, while MSCI's broadest index of Asia-Pacific shares outside Japan <.MIAPJ0000PUS> ended broadly flat.
Japan's Nikkei <.N225> also took a heavy 2 percent hit, as the yen took advantage of a weakened dollar in Asian trading and as investors locked in profits after the previous session's 4 percent rally. [.T]
OIL, TREASURY YIELDS REBOUND
The wilting of the dollar this month has come amid signs that with global growth and inflation falling, the U.S. Federal Reserve may hold off from a first post-financial crisis interest rate hike until deep into next year.
Yields on benchmark U.S. 10-year government bonds
Dallas Federal Reserve President Richard Fisher also said on Monday that last week's market turbulence should not stop the Fed from ending its stimulus program, and that the economy could be fully recovered from the effects of the financial crisis and recession by as early as next year.
Shares in French oil giant Total
Like much of the region's stock markets, though, Total shares fought back from a early 1.2 percent drop to climb higher.
In commodities trading, spot gold
Oil
(Additional reporting by China Economics Team; Editing by Susan Fenton)