German Sentiment Data Boost European Shares
German government bond yields eased away from record lows hit earlier in the session and stocks and the euro rose on Friday after the influential Ifo survey showed a surprise improvement in German business sentiment in April.
The Munich-based Ifo think tank said its business climate index, based on a monthly survey of some 7,000 companies, inched up to 109.9 in April from 109.8 in March, its sixth consecutive monthly rise and defying expectations for a fall.
The index now stands at its highest level since July 2011, a further sign that Europe's largest economy continues to outpace peers and shrug off the effects of the euro zone debt crisis.
German Bund futures erased early gains to stand flat at 140.62, having eased from a record high of 140.86 hit before the data release.
The euro rose to a session high against the dollar of $1.3180 from $1.3148, with option expiries at around $1.3200 expected to check gains, and struck a two-week peak of 107.57 yen against the Japanese currency.
The FTSE Eurofirst index of top European shares reversed early losses as banks rebounded, to trade 0.05 percent higher at 1041.33 and was on track to record its first weekly gain in nearly a month.
Euro zone banks jumped 1.7 percent, led by France's BNP-Paribas and Societe Generale after BofA Merrill Lynch upgraded its recommendation on the stocks.
"At these levels, we believe that the valuation ratios are factoring in the uncertainties on business model and profitability related to the upcoming French elections as well as elevated sovereign risks," BofA-ML said in a note on BNP Paribas.
Shares in the two lenders had fallen around 20 percent since the start of the month as new concerns about Spain's fiscal outlook and uncertainty before a French presidential election, which begins on Sunday, revived fears about banks' exposure to euro zone sovereign debt.
Germany's Dax, up 0.4, was the best performer among national indexes, boosted by the Ifo.
World stocks as measured by the MSCI world equity index were down 0.2 percent at 324.92 and off around 3 percent for the month.
Riskier assets and commodity-linked currencies had come under pressure overnight on growing fears about the euro zone debt crisis and uncertainty over global growth after weak U.S. unemployment and factory activity data on Thursday.
A weekend featuring a potentially rocky meeting of the International Monetary Fund, which is seeking to boost its funds to help contain Europe's problems has heightened market nerves.
Major emerging powers stood ready to pledge money to bolster the IMF's crisis-fighting war chest, though Brazil was holding out for promises that their voting power at the global lender would increase.
"If Brazil really digs in its heels, I don't think the market will be too kind to it," Markus Huber, head of German high net worth trading at ETX Capital. "There has to be unity. That's the only way investors think the crisis can be contained."
German 10-year yields were at 1.62 percent, off an all-time low of 1.597 percent hit early on Friday, while riskier Spanish 10-year yields were close to the key 6 percent level after breaking above it earlier. A sustained break of 6 percent in 10-year yields could see Madrid's borrowing costs accelerate to unaffordable levels.
The cost of insuring Spanish, Italian and other euro zone debt against a default jumped as fears over Spain's ability to control its finances generated broader concern about the currency bloc.
Five-year credit default swaps (CDS) on Spanish government debt rose to 519 basis points, within a few basis points of record highs hit earlier this week. Italian CDS rose 24 bps on the day to 479 bps and even the region's more secure issuers were affected, with Austrian and French insurance costs rising.
The dollar slipped against a basket of major currencies was also little changed though it gained against the yen on expectations the Bank of Japan will ease policy further next week.