World stocks gain momentum, Europe at seven-year high

By Jamie McGeever

LONDON (Reuters) – World stocks marched higher again on Thursday, drawing support from European auto sales and German trade data, while expectations that the first U.S. interest rate increase will come in the latter part of the year continue to grow.

Investors also breathed a sigh of relief as Greece confirmed it will pay a 450 million-euro loan tranche to the International Monetary Fund on Thursday, meeting a deadline and taking the immediate heat off the cash-strapped country.

In early trading, Europe’s EuroFirst 300 index of leading shares was up 0.5 percent at a seven-year high of 1,619 points (.FTEU3), putting the index on track for its ninth weekly gain in the last 10.

Britain’s FTSE 100 (.FTSE) and Germany’s DAX (.GDAXI) were also both 0.5 percent higher at 6,972 points and 12,094 points, respectively.

“The fundamental upward trend in German industry is intact, despite some monthly volatility,” said Andreas Rees, chief German economist at UniCredit.

German industrial production rose, while imports and exports both grew faster than expected in February, data on Thursday showed. Auto industry figures published late on Wednesday, meanwhile, showed that the auto sector’s recovery is broadening to France, Spain, Italy and Portugal. [ID:nB4N0VU00H] [ID:nL5N0X52S6] [ID:nL5N0X53GR]

Earlier in Asia, MSCI’s broadest index of Asia-Pacific shares outside Japan gained 0.7 percent to its highest since mid-September. That marks nine straight winning sessions, its best run since September 2013.

Japanese stocks rose 0.75 percent to a 15-year high, while Hong Kong (.HSI) powered up 2.7 percent to a seven-year peak. Hong Kong is up nearly 7 percent so far this week, by far its best week since December 2011.

Futures pointed to a lower open on Wall Street, however, with investors concerned that the recent strength of the U.S. dollar will have a detrimental effect on the first-quarter earnings season, which got underway on Wednesday (SPc1).

UK ELECTION JITTERS SOAR

Currency traders focused on the “hawkish” side of the Federal Reserve’s last policy meeting minutes, which suggested a June rate hike is still on the table. The dollar index (.DXY) was up 0.5 percent, its fourth consecutive daily rise and its longest winning streak in three months.

Fed officials acknowledged risks from overseas and a weak start to the year at their March meeting. But they remained confident enough in the strength of the recovery to continue laying the groundwork for an interest rate hike later this year, according to minutes from the meeting released on Wednesday. [ID:nW1N0WE01O]

The euro fell further from around $ 1.10, down a third of a percent on the day to $ 1.0740 (EUR=). Sterling shed 0.5 percent to $ 1.4785 (GBP=).

Volatility in sterling options markets rose to levels not seen for years, as investors sought protection against swings in the currency as Britain’s May 7 general election approaches.

One-month euro/sterling implied volatility surged to its highest in six years, and sterling/dollar volatility to its highest since September 2011.

Opinion polls show the ruling Conservatives and the opposition Labour neck-and-neck, making a hung parliament and a lengthy period of uncertainty likely. [ID:nL5N0X6121]

In bonds, benchmark 10-year U.S. Treasury yields were little changed at 1.90 percent . Greek yields fell as Athens confirmed it will meet its IMF repayment deadline and investors turned their attention to sale of long-term Spanish debt later in the day.

“The news on Greece is helping push European markets higher, although it doesn’t mean at all that a long-term solution has been reached,” said Alexandre Baradez, chief market analyst at IG France.

Crude oil took back some lost ground following a plunge overnight triggered by a rise in U.S. stocks and news of record Saudi oil production. [O/R]

U.S. crude (CLc1) was up 1.8 percent at $ 51.34 a barrel after shedding nearly 7 percent on Wednesday. Brent (LCOc1) rose about 2 percent to $ 56.67.

(Reporting by Jamie McGeever; Additional reporting by Blaise Robinson in Paris; 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)