LONDON: World stocks rose to their highest this year and the euro gained on Thursday as good demand at European government bond auctions outweighed worries about a messy Greek debt default, and fresh US data added to hopes for the global economy.
The main US stock markets were set to open higher, with the S&P 500 index already up four percent in the first 11 trading days of the year, after data showed new applications for unemployment benefits fell last week to a near four-year low.
Bank of America Corp's fourth-quarter profit, which reversed a year-earlier loss, and news that Morgan Stanley had performed better than analysts had expected in the same period along with flat US inflation data also helped lift sentiment.
"The broad-brush impression from the data is that it's a Goldilocks setup: inflation tame, but economic growth showing signs of accelerating," Greg Anderson, senior currency strategist at Citigroup in New York said.
The initial impact of the data was to give a lift to US stock index futures but there was little impact on the dollar's exchange rate against a basket of currencies.
"On the surface this number (jobless claims) looks to be very positive and is pretty much consistent with other data we've seen recently that suggest improvement in underlying fundamentals in the US," said Omer Esiner, chief market analyst at Commonwealth Foreign Exchange in Washington.
Esiner said while the data could initially be positive for riskier assets it also extended the divergence in performance between the US and euro zone economies which could favour dollar-denominated assets.
Feeding the stronger sentiment in European trading was the news that the International Monetary Fund would seek to more than double its war chest by raising $600 billion to help countries deal with the fallout from the crisis.
The fact Greek debt negotiators are still in talks supported sentiment despite reports that there has been little progress on a bond swap deal, seen as crucial if the government is to avoid a chaotic default.
"The news flow we are seeing is reasonably encouraging for risk, with the IMF headlines yesterday and hopes growing over the Greek restructuring talks," Tom Levinson, currency strategist at ING said.
The euro was up around 0.3 percent against the dollar rising to about $1.2904, near its two-week high of $1.2908. European shares made a strong start, tracking robust gains made in Asia.
The FTSEurofirst 300 index of top European shares was up 0.85 percent at 1,043.43 points to trade near 5-1/2 month highs.
The main European index for bank stocks was up over five percent, following the encouraging results from the big US banks, and despite the problems in the Greek debt negotiations.
Global stocks as measured by the MSCI index were up 0.6 percent at 312.59, the highest level since Oct. 31.
Stock markets have been performing well since the start of the year, bolstered by good economic numbers from the United States and the extra cash sloshing around the market due to central banks' efforts to bolster banking liquidity.
Spain and France were together able to sell around 16 billion euros of new bonds despite both being recently downgraded by ratings agency Standard and Poor's, with the results showing investors were becoming less nervous about the ability of euro zone government to refinance their debts.
Spain sold 6.6 billion euros ($8.5 billion) of debt compared to the planned 4.5 billion and demand for the 10-year bonds in the sale was more than twice the amount on offer. France sold 9.5 billion euros at lower yields to previous auctions.
"Potential snags as regards Greece's (private sector) deal and Italy's surge in redemptions from February both, however, leave a question mark over how sustainable this positive trend will be. For now, though, the glass half-full brigade has the upper hand," Richard McGuire rate strategist at Rabobank said.
In commodity markets Brent crude oil rose to around $111.50 on Thursday as risk appetite improved on hopes the euro zone debt crisis was slowly being resolved and on signs of steadier global economic growth.
Spot gold was little changed but on course for a fourth session of gains, at around $1,659.60 an ounce, approaching a one-month high of $1,667.41.
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