Global stocks rebound, euro wobbles as focus stays on debt
European stock index futures rose on Thursday, following a bounce in Asia, on signs that European policymakers are taking tentative steps to tackle a crippling debt crisis, but the euro slipped amid skepticism that a Greek default can be avoided.
Global equities were buoyed by comments from a top European official on plans for a common euro zone bond and by France and Germany pledging their commitment to keeping debt-laden Greece in the single currency.
Still, some fund managers doubted the rebound would be sustained.
I haven't seen anything that provides me comfort that the situation has been dealt with yet, said Simon Burge, a portfolio manager at ATI Asset Management in Sydney.
Euro STOXX 50 index futures rose 1.1 percent, and DAX and CAC-40 futures also gained around 1 percent, while financial bookmakers called the FTSE 100 <.FTSE> to open as much as 1.4 percent up. <.EU> <.L>
Equity markets have been hammered since late July on the twin fears of renewed recession in the United States and the potential for Europe's sovereign debt woes to trigger a wider crisis in the financial system. This week, European stocks hitting a two-year low.
TECH STOCKS DO THE BEST
Japan's Nikkei share average <.N225> closed 1.8 percent higher, while MSCI's broadest index of Asia Pacific shares outside Japan <.MIAPJ0000PUS> gained 0.9 percent, with tech stocks the best performers <.MIAPJIT00PUS>. <.T>
The Nikkei was coming off a two-and-a-half year closing low on Wednesday, while the MSCI index, which touched a 14-month low in the previous session, remained more than 20 percent below its 2011 high in April.
Optimism over tentative steps to resolve Europe's debt crisis trumped weaker-than-expected retail sales data in the U.S., helping the S&P 500 <.SPX> close up more than 1 percent.
Some traders attributed the gains on Wall Street to short-covering -- when market players buy to realize profits on bets a stock will fall in price -- ahead of inflation numbers in the United States, with Europe still the clear focus. <.N>
CREDIT CRUNCH
European finance ministers have been warned confidentially of the danger of a renewed credit crunch as a systemic crisis in euro zone sovereign debt spills over to banks, according to documents obtained by Reuters on Wednesday.
The euro jumped to a three-day peak of $1.3873 on Wednesday after a 25-minute telephone call between the leaders of France, Germany and Greece which boosted confidence that Athens will receive the next tranche of aid from the European Union and IMF and avoid imminent default.
The single currency's recovery was further helped after European Commission President Jose Manuel Barroso flagged plans to present options soon for the introduction of common euro bonds, seen by many as a key tool to ease the crisis.
The project, however, is likely to meet stiff political resistance and potential legal challenges in Germany.
The euro edged down on Thursday to around $1.3720. Most strategists believe its trend remains downwards, with only short-term solutions to the crisis on the table for now.
Nothing has changed. Greece is still highly likely to have to do more restructuring, said Joseph Capurso, currency strategist at Commonwealth Bank of Australia.
BONDS FIRM
Many perceived safe-haven assets, including the dollar, U.S. Treasuries and Japanese government bonds (JGBs), remained in demand, underlining the brittle nature of the stocks rally.
Ten-year Treasury notes nudged up 1.5/32 in price to yield 1.988 percent, compared with 1.992 percent in late U.S. trade. The dollar rose 0.2 percent against a basket of major currencies <.DXY>.
The yield on benchmark 10-year JGBs was steady at 0.990 percent.
Stocks are catching up with the relief rally on Wall Street, but bonds are being supported too as investors fret over a possible rating cut to Italy and a Greek default, said a trader at a European bank.
But spot gold slipped around 0.7 percent to about $1,808 an ounce, after falling nearly 1 percent in the previous session. It hit a lifetime high of around $1,920 an ounce last week.
Oil eased as rising fuel stocks and falling demand in top consumer the United States reinforced views that slowing economic growth and Europe's debt crisis would dent energy use.
Brent crude edged down 0.3 percent to $112 a barrel, while U.S. crude lost 0.4 percent to $88.57.
The concern is that what starts as a financial crisis will drive the cost of borrowing to levels where it is difficult for the corporate world to invest, depressing economic activity and putting pressure on oil, said Michael McCarthy, chief markets strategist at CMC Markets in Sydney.
(Additional Reporting by Cecile Lefort in Sydney, Sonali Paul in Melbourne Hideyuki Sano in Tokyo and Alejandro Barbajosa in Singapore; Editing by Richard Borsuk)
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