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 Russian debt insurance costs rose after European Union leaders
proposed sanctions on Russian banks which are majority-owned by the
government. Those measures were proposed after a Malaysian Airlines
plane was downed over Ukraine last week, killing 298, possibly by a
missile furnished by Russia.
European stocks rose 0.4 percent and the euro hit the day's highs at
$1.3484, pulling off eight-month lows, after Markit's Composite
Purchasing Managers' Index (PMI) of companies across the euro zone,
a good early indicator of overall growth, rose to 54.0 in July from
52.8, its highest since April. Any number above 50 indicates
expansion.
The services sector across the 18-member bloc performed better than
any of the 39 economists polled by Reuters had forecast.
Manufacturers also reported a stronger month than the median Reuters
forecast had predicted.
"The activity data offsets some of the weakness we saw last month
and that has helped the euro," said Geoff Yu, a currency strategist
at UBS.
The dollar index dropped from an earlier six-week peak, although the
U.S. currency hit a one-week high against the yen at 101.64.
Russia's five-year credit default swaps rose 17 basis points to 214
bps from earlier on Thursday, according to Markit, following the EU
sanctions proposals, which the EU said were likely to be adopted
next week.
That means it costs $214,000 a year for five years to insure $10
million of Russian debt against default. Russian government bonds
fell.
"If the Europeans do manage to pass some of the new sanctions that
are being talked about, and it's a big if, then it really would be a
big step for Europe," said Viktor Szabo, portfolio manager at
Aberdeen Asset Management.
Emerging-market stocks <.MSCIEF> rose 0.25 percent to 17-month highs
after stronger-than-expected HSBC flash PMI data for China, the
world's second-largest economy.
The index came in at 52.0 for July, well above forecasts and the
highest reading in 18 months. There was also good news on the
outlook, with a sub-index of new orders reaching 53.7.
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U.S. stock futures were indicating a higher open on Wall Street
after the S&P 500's record close on Wednesday. Those gains were
powered by Apple Inc <AAPL.O>, while late trading was dominated by
Facebook Inc <FB.O>, whose shares rose 5.5 percent after hours when
its results beat forecasts.
A better-than-expected U.S. earnings season is helping sentiment
generally. Barclays estimates that of the 22 percent of S&P 500
companies that have reported quarterly results since July 1, 64
percent beat earnings expectations and 65 percent beat revenue
estimates.
The prospect of more sanctions against Russia over the Ukraine
crisis maintained a safety bid for high-rated bonds.
For U.S. Treasuries, investors were buying more liquid shorter-dated
paper, nudging two-year yields below 0.48 percent. But German Bund
yields, which have been trading near record lows, edged up on the
euro zone data to 1.170 percent.
Gold eased to 1,298.30 an ounce, close to earlier one-week lows.
Crude oil prices ran into renewed selling after a bounce on
Wednesday. Brent crude for September delivery fell 26 cents to
$107.77 a barrel. U.S. crude lost 28 cents to $102.84.
(Additional reporting by Marc Jones and Anirban Nag in London and
Wayne Cole in Sydney; Editing by Larry King)
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