World stocks rose on Thursday while the euro hit a two-month peak against the low-yielding dollar on rising expectations the forthcoming earnings season would show strong corporate performance.
Wall Street posted its best one-day gain in about six weeks on Wednesday after financial company State Street said quarterly earnings would far exceed expectations, providing a lifeline to investors after several weeks of dismal economic reports.
Positive comments from State Street ... cheered investors up on the basis that we've got the second-quarter reporting season coming up and perhaps the bank situation in terms of reporting might not be as bad as feared, said Richard Hunter, head of UK equities at Hargreaves Lansdown. The MSCI world equity index rose 0.7 percent to a 1-1/2 week high. The Thomson Reuters global stock index also rose 0.7 percent.
According to Thomson Reuters data, quarterly earnings of S&P 500 companies are expected to rise 27.1 percent in the second quarter after surging 58.3 percent in the first quarter.
The FTSEurofirst 300 index gained nearly 1 percent, led by Danish shipping and oil conglomerate A.P. Moller-Maersk, which rallied 6 percent after the company upgraded its earnings guidance for the full year.
Expectations that stress tests for European banks will not be as stringent as feared also supported the sector, together with some upbeat broker comment.
Credit Suisse raised its sector strategy on European banks to benchmark from 10 percent underweight in a global equity strategy note.
Emerging stocks rose more than 1 percent while U.S. stock futures were steady.
Oil prices jumped to a one-week high above $75 a barrel on an industry report showing U.S. crude inventories plunged last week, stock market gains and hopes global economic recovery is still intact.
The fear over a double-dip recession or something more dramatic has eased a little bit from a month ago, said Yingxi Yu, Singapore-based commodities analyst with Barclays Capital.
Market sentiment remains a very important driver. Oil really follows equity markets and other risky assets.
The bund futures rebounded from an earlier two-week low to gain 10 ticks.
Improving risk appetite pushed the euro to a two-month high of $1.2687, extending its strong run after hitting a four-year low of $1.1876 in early June.
The next focus for the market is the European Central Bank, which holds a news conference at 1230 GMT after its monthly meeting.
It is expected to face pressure to say whether Europe-wide stress tests on banks will be tough enough to convince markets of their worth.
The dollar hit a two-month low against a basket of currencies, before erasing losses to stand up 0.1 percent on the day.
(Additional reporting by Tricia Wright; Editing by Ron Askew)