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 Global stocks touched a record high thanks to renewed strength in
Asian markets. Brent oil fell back from new highs for the year it
had reached after figures showed a decline in U.S. production.
But the widening rift between Greece and its creditors over a deal
that would unlock funds for Athens and prevent a default hit
European stocks. Financials led the reversal in broader indices from
Wednesday's recent multi-year highs.
Credit rating agency Standard & Poor's downgraded Greece late on
Wednesday, and the country's short-term bond yields soared to 27
percent.
The flip side of this was new lows in German yields. The 10-year
Bund yield reached a low of 0.078 percent. Yields on all German
government debt out to January 2024 were negative.
Rate strategists at Royal Bank of Scotland on Thursday issued the
boldest call on Bunds from any major bank, predicting a fall in the
10-year yield to -0.13 percent.
"The simple continuation of an environment similar to today is
likely to push 10-year yields below zero," they said. "There is only
a weak sense that inflation risks have been raised by QE so far."
Borrowing costs in peripheral euro zone bond markets like Spain,
Italy and Portugal rose, however, as the prospect of Greece and the
euro zone reaching agreement appeared to fade.
That also fed into European stocks, encouraging investors to take
profit on the previous day's ECB-fueled rally to historic highs.
The EuroFirst300 index of Europe's leading 300 shares <.FTEU3> was
down 0.75 percent at 1,637 points. Germany's DAX was 1.6 percent
lower at 12,034 points <.GDAXI>, France's CAC40 <.FCHI> was down 0.7
percent and Britain's FTSE100 <.FTSE> down a half of one percent.
Earlier in Asia, MSCI's broadest index of Asia-Pacific shares
outside Japan <.MIAPJ0000PUS> touched a seven-year high and closed
up 1.1 percent. South Korean, Australian, Chinese and Malaysian
stocks gained, pushing the MSCI global index to a new high of 438.99
points.
Japan's Nikkei lost 0.1 percent, and U.S. futures pointed to a fall
of almost 0.5 percent at the open on Wall Street after shares posted
sizable gains on Wednesday on several strong corporate earnings
results.
AUSSIE SOARS
Lackluster economic indicators have been mostly kind to risk assets
this week. Wednesday's weak Chinese data further boosted
expectations of monetary stimulus by Beijing and soft U.S. data have
helped by dampening prospects of an early rate increase by the
Federal Reserve.
In currencies, the biggest mover on Thursday was the Aussie, lifted
to a three-week high as stronger-than-expected Australian employment
numbers reduced the odds of an interest rate cut in the next few
months.
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The Australian dollar was last up 1.4 percent at $0.7745.
The euro was on a rollercoaster ride, last 0.5 percent higher at
$1.0735, rebounding more than a cent from an earlier low of $1.0626.
ECB President Mario Draghi on Wednesday committed to seeing the
central bank fulfill its bond-buying program, quashing speculation
in some quarters that the program's success could lead to an early
"taper".
"From the perspective of the euro we have one clear conclusion: the
message from Draghi is that nothing has changed and that we are only
at the very start of the QE easing that is coming," said Derek
Halpenny, senior currency strategist at BTMU in London.
The U.S. dollar, which neared 121 yen at the start of the week, was
little changed at 119.10 yen after slipping to 118.79 overnight.
The market will look to U.S. housing data later for further dollar
incentives.
A surge in crude oil also supported commodity currencies such as the
Canadian dollar. Crude rallied overnight after government data
showed oil inventories in the United States rose less than expected
last week.
Brent crude rose as much as 5 percent overnight to a high of $63.10
a barrel, its highest since December last year. It was last trading
at $62.50.
U.S. crude was at $55.60 a barrel after jumping nearly 6 percent on
Wednesday.
(Editing by Larry King; To read Reuters Global Investing Blog click
on http://blogs.reuters.com/globalinvesting; for the MacroScope Blog
click on http://blogs.reuters.com/macroscope; for Hedge Fund Blog
Hub click on http://blogs.reuters.com/hedgehub)
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