Stocks extend gains, dollar lifted by Fed feelings

[June 11, 2015]  By Marc Jones

LONDON (Reuters) - European shares saw fresh gains on Thursday after their best day in over a month and as bets that the United States could be edging towards its first interest rate rise kept upward pressure on global bond yields and the dollar.

At the other end of the policy spectrum, the New Zealand dollar tumbled to a five-year low after its central bank cut interest rates for the first time in four years and South Korean shares got a lift as it cut rates to new a record low.

Underlying both moves was sluggish global demand, and in particular from the region's powerhouse China.

Fixed asset investment there grew at its slowest rate in over 14 years new data showed, although industrial output and retail sales growth did show signs of steadying following a recent dive.

Europe's main bourses picked after a slow start with the region's benchmark FTSEurofirst 300  last up 0.5 percent, as hopes returned that Greece was close to sealing a deal with its creditors. Athens' stock market surged more than 6 percent.

The euro helped too with it back down to $1.1250 as the dollar got a lift ahead of what are expected to be healthy U.S. jobless claims and retail sales data later that could nudge the Federal Reserve towards an September rate rise.

It would be its first hike in almost a decade and would finally mark a turn in the direction of the flow of easy money that has repeatedly driven world stocks and bond prices to record highs in recent years.

"The day is going to be dominated in the end by whether signs of spring in the U.S. economy have continued, will Americans come out and flash cash at last," said Kit Juckes head of global currency strategy at Societe Generale.

"And from everything overnight, its the chill from China. There could be further downside in Australia and New Zealand (currencies) and we could be talking about Asian FX weakness as a theme going forward."

KIWI CRUSH

Overnight, Tokyo's Nikkei had added 1.4 percent while Australian shares gained 1.3 percent and South Korea's Kospi advanced 0.3 percent, as they reacted to regional macro news and followed Wednesday's strong gains by Wall Street.

New Zealand's rate cut saw its dollar slide more than 2 percent on the day to a five-year low of $0.7000. Most economists had not expected a cut and though traders had been saying it was going to be a close call, it got a further hit as the RBNZ said it would ease again if needed.

"The RBNZ has again proved to be more flexible than the market gives it credit for," said Michael Turner, a strategist at RBC Capital Markets.

The yen gave back some of its previous session's gains against the dollar made on comments from Bank of Japan Governor Haruhiko Kuroda who said the yen was already "very weak."

The greenback was last up 0.4 percent at 123.21 yen <JPY=>, but still some distance from a 13-year high of 125.86 touched Friday on robust U.S. non-farm payrolls data.

The stronger dollar meant commodities were on the back foot again with Brent oil flat at just under $66 a barrel and metals markets from industrial copper to precious gold all deep in the red.

German benchmark 10-year Bund yields dipped in line with the euro as has become the trend in recent months but held above the psychological 1 percent mark as higher U.S. yields kept them on a tight leash.

(Editing by Toby Chopra)

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