European Shares Near Nine-Month Highs
European shares traded near eight-month highs on Thursday as a brighter global economic outlook fueled investor risk appetite, underpinning the dollar and reducing the appeal of safe-haven government debt.
Improving U.S. economic data and a signal from the Federal Reserve that it was not planning further monetary easing measures for now has sparked a big selloff in U.S. government debt, lifted the greenback against a basket of currencies and eased prices of commodities traded in dollars.
"Investor sentiment has completely changed. In the past, people were expecting (U.S.) growth of around 1.5 percent but now they say growth could top three percent," said Hiroshi Yokotani, director of fixed income at Alliance Bernstein.
World equities markets shared in the gains on Wednesday and inched higher again ahead of further U.S. data including two key surveys of manufacturing activity, producer prices for February and weekly jobless claims numbers.
"When we get good data, the QE3 (U.S. monetary easing) risk decreases and the main risk for the dollar decreases," said Ulrich Leuchtmann, head of FX research at Commerzbank.
"Even when data comes in around expectations it is a good signal for the dollar, when normally it would be neutral."
The dollar touched a fresh 11-month high of 84.187 yen before stabilising at around 83.74 yen, little changed on the day. The euro was stuck around a one-month lows just above $1.30 against the dollar at $1.3040.
The Swiss franc rose against the dollar and hit a session high versus the euro after the Swiss National Bank kept its franc floor of 1.20 to the euro unchanged. Some had speculated the SNB could raise the floor. The SNB reiterated it was ready to take further measures if needed.
In equity markets the broad FTSE Eurofirst index of top European shares rose 0.2 percent to 1100.15 after closing on Wednesday at a near eight-month high. German and Spanish shares were up 0.3 percent while Italian stocks were down 0.4 percent..
The MSCI world equity index was 0.1 percent higher at 333.33 with worries about the Chinese growth outlook hitting many Asian markets outside Japan.
Chinese Premier Wen Jiabao said on Wednesday the world's second largest economy must embrace slower growth and bolder political reform to keep its economy from faltering.
He also dampened hopes for any near-term easing measures in the country's property sector, sending Chinese shares lower.
China's foreign direct investment (FDI) in February also posted a fourth straight monthly fall following recent data showing the trade balance to be $31.5 billion in the red in February -- its largest deficit in at least a decade.
DEBT SENTIMENT SHIFT
In the European debt markets, Bunds fell in line with moves in U.S. Treasuries, with German 10-year debt yielding 1.98 percent, up 2.3 basis points a day after strong demand at an Italian debt auction took the shine off safe-haven debt.
Euro zone periphery peer Spain will be in focus later when it looks to sell up to 3.5 billion euros ($4.56 billion) in fresh paper, also likely to be strongly supported despite a tussle with euro zone partners over lowering its deficit-cutting targets.
British gilt futures tumbled half a point to a contract low in early trade, lagging their euro zone peers after credit agency Fitch cut its outlook on Britain's AAA rating to negative, warning the country faced a greater than 1-in-2 chance of losing its top-notch rating.
In commodity markets the recent surge in the dollar and concerns over the level of demand from China as its economy slows countered signs of stronger economic growth elsewhere and the likelihood central banks have called a halt to fresh monetary easing for a while.
Spot gold hit an intraday high at $1,648.41 an ounce before settling at around $1,643.59 after prices fell more than 2 percent on Wednesday.
Brent crude inched above $125 a barrel, after falling more than a dollar the previous session as traders balanced the firmer dollar and bulging U.S. crude stocks against lingering concerns about tensions between Iran and the West.
U.S. April crude rose 46 cents to $105.89 a barrel, after falling $1.28 to $105.43 on Wednesday.