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 Europe's EuroFirst 300 index of leading shares was down 0.2
percent <.FTEU3>, Germany's DAX <.GDAXI> was down 0.1 percent and
Britain's FTSE 100 <.FTSE> down a half of one percent.
Earnings also weighed on European shares. Richemont <CFR.VX> warned
its net profit for the year would drop by 36 percent and <PRTP.PA>
Kering posted a bigger-than-expected drop in sales, and both luxury
groups were among the worst performers.
Tesco <TSCO.L> was not to blame for the drop, however. Its shares
rose as much as 2.5 percent in early trade after a record 6.4
billion pound that the market bet would mark an end to a run of bad
news from Britain's largest retailer.
"The stock is up as investors are thinking that the worst is behind
them and good news will follow from here now," said Naeem Islam,
chief market analyst at Avatrade.
"The positive momentum from Asian markets filtered into European
markets at first. But traders are still taking a very cautious
approach now."
In Asia, China's leading index rose 2.4 percent to a seven-year high
<.SSEC> and Japan's Nikkei <.N225> closed above the 20,000 point
level for the first time in 15 years.
Asian stocks continued to draw support from Chinese measures to spur
lending and combat a slowing economy. On Sunday, China's central
bank cut the reserve requirement ratio for the country's lenders for
the second time in two months.
The Shanghai Composite Index was also spurred by comments from state
media which declared the bull market "has just begun."
GREEK WOES
The Greek government's looming cash crunch weighed on local markets
as Greek stocks hit a three-year low and the two-year bond yield
hovered around 30 percent. All other peripheral and core euro zone
bond yields were lower, however.
European finance ministers meet to discuss Greece this week for what
had been billed as a crunch meeting. The deadline will be pushed
back, however, and the market remained cautious after Greek finance
minister Yanis Varoufakis cited signs of convergence on Tuesday.
European Central Bank board member Benoit Coeure said the ECB will
continue to fund Greek banks as long as they were solvent and
dismissed the growing talk that Greece might ditch the euro.
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Germany's benchmark 10-year yield slipped one basis point to 9 basis
points <DE10YT=TWEB>, while the 10-year U.S. yield fell back two
basis points to 1.89 percent <US10YT=RR>.
Spanish, French and Italian yields fell, with investor cash to be
ploughed back into these countries' bonds between now and the end of
the month reaching as much as 65 billion euros, according to Citi
analysts' estimates.
The euro inched up to $1.0750 <EUR=>.
"At the margin, the commentary from the EU/Greek talks was hopeful,
though not hopeful of any resolution this week," said SocGen's
currency analysts, noting that as long as $1.0850 resistance held
the trend could still be lower.
The Australian dollar was the biggest currency mover. It gained
almost 1 percent to $0.7788 after core inflation rose 0.6 percent in
the first quarter, higher than a forecast of 0.5 percent, and
possibly taking a rate cut next month off the table.
In commodities, crude oil extended losses as Middle East tensions
eased after Saudi Arabia announced an end to air strikes against
Iran-allied Houthi rebels in Yemen, though residents reported a
further strike on Thursday.
Brent crude was down 0.75 percent at $61.62 a barrel <LCOc1> after
tumbling more than 2 percent overnight, and U.S. crude futures were
down 1.2 percent at $55.94 a barrel <CLc1>.
(Reporting by Jamie McGeever; editing by John Stonestreet; 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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