European shares, euro higher as risk appetite grows
European shares and the euro led a fresh push by risk assets on Tuesday, buoyed by returning confidence in Germany's economy, upbeat U.S. data and earnings and hopes Europe can advance plans to tackle Spain and Greece's debts later this week.
A closely watched monthly survey from the ZEW institute showed a better than expected improvement in German investor confidence, adding to recent signs that the euro zone's biggest economy is fighting hard to stave off the bloc's debt troubles.
It came hot on the heels of positive U.S. retail figures and Citigroup earnings on Monday and helped investors look past the worst month for European car sales in a year and a deterioration in triple A-rated Austria's finances.
"The improvement in the mood is continuing." said Bernd Hartmann, an economist at VP Bank. "The concerns over a renewed escalation of the euro zone debt crisis have eased appreciably and thus concerns about a further worsening of the economic situation."
European shares on the FTSE Eurofirst 300 index <.FTEU3> were up 0.4 percent to 1102 at 1000 GMT, with London's FTSE 100 , Paris's CAC-40 and Frankfurt's DAX all in positive territory for the second day running.
The euro, which has risen almost 1 percent so far this week, broke above the $1.30 threshold against a marginally weaker dollar, albeit one which it hit a one-month high versus the yen, supported by Softbank's bid for Sprint.
The single currency has been closely tracking developments in the euro zone's three-year-old debt crisis.
European leaders meet in Brussels on Thursday and investors looking for signals that may affect expectations that Spain will ask for a bailout in the coming weeks - a move which would activate the European Central Bank's bond buying scheme - and that Greece will be given support to allow it stay in the euro.
"There is a feeling of stalemate in the sense that the market is waiting for Spain to ask for a bailout," said Jane Foley, senior currency strategist at Rabobank. "There is a good chance that the euro could stay rangebound for a while."
DAY AT THE ZEW
After the ZEW survey from Germany, Robert Parkes, an equity strategist at HSBC, said there was growing evidence that the world economy was starting to stabilize following the recent support from the ECB, the Federal Reserve and the Bank of Japan.
"We are still positive and think this rally still has legs," Parkes said.
"The four biggest U.S. indicators have all surprised to the upside, there is some tentative evidence that the Chinese economy is starting to re-accelerate and even in Europe, arguably the problem child of the global economy, there are signs of stabilization."
Bond markets were largely quiet at mid-morning. Continuing the recent trend, demand for German government bonds - viewed as a safe-haven asset - dipped, while Italian and Spanish 10-year bonds were stable.
Commodities were also subdued. Oil was steady above $115 a barrel, underpinned by supply concerns after the European Union slapped more sanctions on Iran, while cooper and other metals attuned to the economic cycle remained pegged in ranges.
Gold, meanwhile, remained near a one-month low, with investors cautious that the central bank stimulus which has long been driving the rise in the precious metal could come to an end if key global economies continue to improve.
Noting effects from the Federal Reserve's quantitative easing, Li Ning, an analyst at Shanghai CIFCO Futures, said: "The support from QE3 is fading.
"And if the economy keeps improving, investors will wonder about the length and scale of QE3.
GOLDMAN, IBM, INTEL
Australian shares hit a 14-month high and the local dollar climbed 0.75 percent as investors eyed further interest rate cuts after the central bank said its cut this month was a bid to tackle slowing growth.
Forecast-beating earnings from U.S. banking giant Citigroup and better than expected U.S. retail sales data had helped Asian shares rise 0.6 percent as they brushed off caution ahead of Thursday's third-quarter economic growth numbers from China.
There will be another deluge of U.S. data and earnings later with futures prices pointing to another positive open on Wall Street when trading resumes.
Inflation and housing figures are due while results from corporate bellwethers such as Goldman Sachs , IBM and Intel will be closely followed, with investors hoping for a continuation of the generally upbeat start to earnings season.
"I think we are seeing early signs that the global economy is bottoming out cyclically," said ABN Amro economist Nick Kounis. "If it looks like we are embarking on a moderate upswing, it could give markets some impetus."
(Additional reporting by Jessica Mortimer; Editing by Alastair Macdonald)