Morning MoneyBeat Europe: Volatility Isn't Going Away

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Good morning Europe,

Eurozone bonds took a battering on Wednesday after European Central Bank President Mario Draghi said investors would just have to get used to higher volatility in the sovereign debt market.

Speaking at a press conference after the latest ECB policy setting meeting, Mr. Draghi made it clear that the central bank wasn't in the least inclined to end its asset purchase program early, notwithstanding a tick-up in the region's inflation rate and a relatively rosy economic outlook. Normally this might be good news for the bond market -- after all, the ECB's purchases are heavily concentrated on sovereign debt.

But any investors hoping Mr. Draghi might offer words to sooth a recently jittery bond market were sorely disappointed. The ECB isn't going to amend its policy in response to rising yields. The result of all this was even harder bond selling.

As eurozone bond yields rose, so too did the euro and equities. And the overall market reaction makes sense. The ECB will keep pressing on the monetary pedal, which means more inflation and higher growth. Which is good for corporate Europe, good for euro-based investors and bad for bonds.

Meanwhile, there was a trickle of optimism about Greece. Negotiations continue between Greece and its creditors and there are suggestions of give on both sides. At the same time, Mr. Draghi suggested that a failure by Greece to make its next repayment to the International Monetary Fund on Friday might not automatically lead to default. Instead, Greece might be able to roll all the month's IMF obligations to the end of the month, giving its Prime Minister Alexis Tsipras a bit more time to strike a deal.

Elsewhere, investors turned their focus to the latest Opec meeting being held in Vienna this week and awaited the crucial U.S. non-farm payrolls numbers out on Friday.

Market Snapshot: U.S. markets (Wednesday close) DJIA up 0.36%, Nasdaq up 0.45%, S&P 500 up 0.21%. Nikkei (Thursday close) up 0.1%. Brent crude down 0.14% at $63.71. Gold down 0.09% at $1183.80. EUR/USD at $1.1265, USD/JPY at ¥124.37. 10 year Treasury yields 2.38%, Bund 0.93%, Gilt 2.08%.

Watch For: Bank of England rate announcement, U.S. initial jobless claims.

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From The Wall Street Journal:

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