LONDON: A strong rebound in Italian bank shares lifted European and world stocks on Monday, putting the brakes on risk-averse moves that had earlier lifted the yen to a 17-month high against the dollar and pushed German bond yields to a one-year low.
Europe's FTSEuroFirst 300 index of leading shares rose 0.8 percent, Germany's DAX was up 1.3 percent, France's CAC 40 rose 0.8 percent and Britain's FTSE 100 was up 0.2 percent.
All had been sharply lower earlier.
US stock futures pointed to a rise of around 0.4 percent at the open on Wall Street.
As the US first-quarter earnings season kicks off and G20 finance chiefs gear up for talks in Washington later this week on the sidelines of the IMF Spring meetings, investors initially chose to play safe on Monday.
Europe's main indices fell as much as 1 percent, Japan's yen rose to a 17-month high against the dollar and Germany's 10-year bond yield hit a one-year low. The dollar's fall to as low as 107.61 yen prompted the Japanese government to warn that it could take steps to weaken the yen's exchange rate.
The yen's push higher, and data showing a 9.2 percent fall in Japan's core machinery orders in February, helped drag the Nikkei 0.44 percent lower.
But a jump in Italian bank shares ahead of a meeting in Rome between the country's largest lenders, the Treasury and the central bank to set up a rescue fund then lifted European financials and broader indices.
"Reports of a possible system-wide fund announcement this week are promising but we remain cautious until details are announced," UBS analysts said in a note. "(We're) not particularly excited about this even if it is clearly a positive step.
This newsflow will help a bear market rally on the sector that might be sharp," a trader said. Italy's banking index was last up 4.7 percent on the day and is up 13 percent from last week's three-year low. Still, it has fallen more than 30 percent so far this year, against a 9 percent drop for the broader European market.
European stocks have fallen for the last four weeks, and another down week would mark their worst run in almost three years. Japan's Nikkei ended down 0.4 percent, but other Asian markets drew support from lower-than-expected Chinese consumer price inflation data which fuelled investor hopes that Beijing will keep monetary policy loose.
MSCI's broadest index of Asia-Pacific shares outside Japan rose 0.4 percent while Chinese shares were up even more.
YEN IN FOCUS
The greenback's slide against the yen prompted warnings from officials in Tokyo and put investors on alert for direct yen-selling intervention, though many believed Japan would stay its hand.
Japan's top government spokesman, Chief Cabinet Secretary Yoshihide Suga, said on Monday that recent currency moves were one-sided and speculative and that the government would take steps as needed.
With the Federal Reserve seen as being more cautious on hiking interest rates than some had expected, the dollar wallowed close to lows notched last week.
The dollar was last up around 0.1 percent against the yen at 108.15 yen while the euro was down about 0.1 percent at $1.1390. Last week it rose to $1.1454, its highest since October.
"Last week was the yen's week, and this morning, to the extent that anything is happening, is the yen's morning too," Societe Generale's currency strategy team wrote in a note to clients.
The yen has appreciated around 10 percent so far this year. In bond markets, Germany's 10-year yield hit a one-year low of 0.075 percent, bringing last year's record low of 0.05 percent closer into view, before snapping back to 0.12 percent.
Analysts said that bond redemption and coupon payments this week totalling a hefty 55 billion euros will bolster demand for bonds that is already supported by the European Central Bank's recently increased quantitative easing scheme.
The weaker dollar helped lift spot gold to its highest point in nearly three weeks. Gold rose to $1,254 an ounce, its highest since March 22.
It was last up about 0.7 percent at $1,249.11. Oil prices succumbed to a bout of profit-taking after Friday's surge of more than 6 percent.
US crude futures edged down 0.2 percent to $39.65 a barrel, while Brent crude was also down about 0.2 percent at $41.85.
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