By Samuel Indyk and Kevin Buckland
LONDON (Reuters) – European shares rose on Friday and were heading for their biggest one-week jump since September as falling bond yields, stronger-than-forecast China growth figures and upbeat earnings supported riskier assets.
The Chinese data also supported most Asia-Pacific shares, but Japanese markets underperformed after the yen popped to a one-month high due to rising bets that the Bank of Japan will hikes interest rates next week.
The dollar clawed back some of Thursday’s steep declines against major peers, the result of resurgent wagers on a Federal Reserve rate cut by June. Treasury yields also halted their decline, but remained close to the previous session’s lows.
China’s economy grew 5% last year, matching the government’s target, but growth was unbalanced, led by industry and exports and the 2025 outlook remains uncertain as U.S. President-elect Donald Trump returns to the White House.
“If China is starting to do a little better, that’s positive (for European equities),” said Lars Skovgaard, senior investment strategist at Danske Bank.
The pan-European STOXX 600 is up 0.6% on Friday, taking the weekly gain to 2.3%, its biggest one-week jump since September.
Britain’s FTSE 100 and Germany’s DAX both hit intraday record highs on Friday, up 1% and 0.9% respectively.
In Asia, mainland Chinese blue chips and Hong Kong’s Hang Seng both rose 0.3%.
Japan’s Nikkei sagged 0.3%, paring earlier losses of more than 1%. The yen had earlier climbed to the highest since Dec. 19 at 154.98 per dollar then reversed course to last trade about 0.4% lower at 155.75.
MSCI’s world index rose 0.05%.
U.S. S&P 500 futures gained 0.3%, after the cash index closed down 0.2% on Thursday. Those small declines came after a 1.8% jump on Wednesday – the biggest daily percentage gain since the post-election rally on Nov. 6 – fuelled by strong bank earnings at the start of the new reporting season.
“Investors are enjoying the re-anchoring of the market narrative to company fundamentals and away from the macro, with earnings season so far proving robust,” said Kyle Rodda, senior financial market analyst at Capital.com.
BOND YIELDS DROP
Ten-year U.S. Treasury yields stood at 4.6047% in the latest session, after sliding to the lowest since Jan. 6 at 4.5880% on Thursday, when Fed Governor Christopher Waller said three or four interest cuts this year are still possible if U.S. economic data weakens.
Ten-year Japanese government bond yields eased along with overnight moves in Treasuries, even as comments from BOJ Governor Kazuo Ueda and one of his deputies, Ryozo Himino, this week spurred a rise in bets for a quarter-point hike on Jan. 24 to 78%. They indicated wage growth would likely remain strong this year and Japan was progressing towards durably hitting its inflation target.
Sources told Reuters that following a likely policy tightening, the central bank is set to maintain a pledge to keep pushing up borrowing costs if the economy continues to recover.
The dollar index – which measures the greenback against a basket of six major currencies, including the yen – edged up 0.1% to 109.09, but remained 0.5% lower for the week, threatening to snap six straight weeks of gains.
The euro was little changed at $1.0297, while the beleaguered sterling lost 0.3% to $1.2197 after worse-than-forecast British retail sales in December.
Declines in bond yields supported alternative assets.
Bitcoin edged as high as $102,242, its highest since Jan. 7.
Gold stood at $2,704, hovering close to Thursday’s high of $2,724.55, its strongest in more than a month.
Meanwhile, crude oil headed for a fourth consecutive weekly advance as the latest U.S. sanctions on Russian energy trade hit supply and pushed up spot prices and shipping rates. [O/R]
Brent crude futures rose 0.2%, to $81.45 per barrel, on course for a 1.9% rise this week. U.S. West Texas Intermediate crude futures were up 0.4% to $79.02 a barrel, headed for a 2.76% weekly advance of 2.8%.
(Reporting by Samuel Indyk Kevin Buckland; Editing by Kim Coghill and Jacqueline Wong)
