LONDON (Reuters) – Euro and bond yields rose on Thursday as investors priced in an early pullback in stimulus from the European Central Bank, while renewed risk appetite drove global stocks to a 3-1 / 2-week high.
The selloff in safe haven federal and US government bonds puts money into riskier assets, especially financials, despite investors' concerns about it, such as a summit of G7 heads of state and government starting on Friday , in view of the divisions over world trade will break out.
Bank stocks, which tend to benefit from higher bond yields, raised European equities. The pan-European bank index .SX7P jumped 0.5 percent, supporting the STOXX 600.
Banks remain the worst performing sector in Europe since the beginning of the year, but were adversely affected by political risk in Italy.
The MSCI index of global stocks .MIWD00000PUS rose 0.2 percent to its highest level since May 14.
Wall Street was also on a positive note with Dow Jones and S & P 500 index futures ranging from 0.1 to 0.2 percent. The tech-heavy Nasdaq .IXIC was, however, set at a record high.
In Europe, the single currency EUR = its highest since May 15 at $ 1.1838, trading 0.4 percent at $ 1.1815 in its fourth consecutive session. As a result, dollar index .DXY fell 0.4 percent to 93,295.
Germany's 10-year benchmark yield DE10YT = TWEB rose in step with the euro, breaking 0.50% for the first time in two weeks, after signs that the European Central Bank might soon end its stimulus package.
The selloff in German Bunds spread across the Atlantic as the US benchmark 10-year US10YT = RR hit a 2-1 / 2-week high of 2.9940 percent, closer to the 3- Percent level approached a month ago. [ECBchiefeconomistPeterPraetsaidWednesdaythatrobustgrowthismakingthebankincreasinglyconfidentthatinflationisonitswaybacktothetargetwhichcouldincreasetheprospectsofendingthebond-buyingprogramatthenextmeeting
Praet's comments took the market by surprise given the recent slowdown in the eurozone economy.
Thursday's data showed that German industrial orders plunged unexpectedly in April, a fourth consecutive monthly decline.
"It's a complex background where the economy does not fare well, but Europe's economic surprises were not on top," said Antoine Lesne, head of EMEA strategy and research at SPDR ETF State Street.
"Bad momentum has eased the ECB's overall backdrop – but considering the broader macroeconomic picture, it is still positive for risk assets."
Bank of America analysts Merrill Lynch said Praet's speech showed The central bank was ready to see through the recent weaknesses in eurozone data.
The risk-taking movements along the markets coincided with a calendar of potentially destabilizing political events.
The run-up to the G7 summit was dominated by a widening gap between US President Trump's trade and the remaining six members of the club.
But gauges of investor anxiety, including stock volatility, showed little signs of stress, which angered some investors.
The VIX, which measures the volatility of the S & P 500.VIX, was last traded at 11.79. In just 83 days, he dropped from more than 50 to less than 12 – a record record, traders said.
"I am astonished that everyone is so optimistic," said Charles de Boissezon, Deputy Head of Global Asset Allocation and Stock Strategy at Societe Generale.
"All assume that … the central banks will default behind the curve, but that's not so obvious."
Commodity prices continued to rise thanks to a continued strong global economy and tight supply.
Copper CMCU3 peaked this year at $ 7,295 per tonne. It rose 0.8 percent as concerns over the disruption at the Escondida mine in Chile persisted. It was on the way to the sixth direct profit day, the longest since December.
Oil prices also rose as lower exports from OPEC member Venezuela depressed supply on the market.
Brent crude oil futures LCOc1 traded 1.4 percent at $ 76.46 a barrel and US West Texas Intermediate (WTI) crude CLc1 down 1 percent at $ 65.39.
Gold prices rose higher, with Spot Gold XAU trading at $ 1,298.75 an ounce, up 0.2 percent.
In emerging markets, the .MSCIEF shares rose 0.4 percent to a three-week high, buoyed by the weaker dollar. UBS analysts declared "buying times" for emerging stocks and upgraded Mexico, Poland and Colombia while downgrading Brazil.
***** For the Reuters Live Markets Blog on European and UK Stock Markets, enter the code LIVE in a message window *****
Report by Helen Reid, edited by John Stonestreet and Alexander Smith