World stocks rose to their highs for the year and the euro gained on Thursday as good demand at European government bond auctions overcame worries about a messy Greek debt default, lifting the single currency to two-week highs.
The main U.S. stock markets also looked set to open higher, with the S&P 500 index already up four percent in the first 11 trading days of the year, after Bank of America Corp (BAC.N) reported a fourth-quarter profit, reversing a year-earlier loss.
Data on U.S. housing starts, jobless claims and the Philadelphia Federal Reserve's manufacturing survey due later could all add fuel to the gains. Falling energy prices are also seen containing the overall consumer price index from rising in December for the third month in a row.
Feeding the stronger sentiment in European trading was news that the International Monetary Fund would seek to more than double its war chest by raising $600 billion to help countries deal with the fallout from the crisis.
The fact Greek debt negotiators are still in talks supported sentiment despite reports that there has been little progress on a bond swap deal, seen as crucial if the government is to avoid a chaotic default.
The newsflow we are seeing is reasonably encouraging for risk, with the IMF headlines yesterday and hopes growing over the Greek restructuring talks, Tom Levinson, currency strategist at ING said.
The euro was up around 0.3 percent against the dollar at $1.2890, near its two-week high of $1.2908. European shares made a strong start, tracking robust gains made in Asia.
The FTSEurofirst 300 .FTEU3 index of top European shares was up 0.5 percent at 1,039.50 points to trade near 5-1/2 month highs.
The main European index for bank stocks .SX7P was up nearly six percent, following the encouraging results from top U.S. banks and despite the problems in the Greek debt negotiations.
Global stocks as measured by the MSCI index .MIWD00000PUS were up 0.5 percent at 312.59, the highest level since October 31.
Stock markets have been performing well since the start of the year, bolstered by good economic numbers from the United States and the extra cash sloshing around the market due to central banks' efforts to bolster banking liquidity.
If you are a long-term investor, there are attractions in the equity market as corporate balance sheets are robust in many cases and cash flows are reliable, said Jeremy Batstone-Carr, strategist at Charles Stanley.
BOND AUCTIONS GO WELL
Spain and France were together able to sell around 16 billion euros of new bonds despite both being recently downgraded by ratings agency Standard and Poor's, with the auction results showing investors were becoming less nervous about the ability of euro zone government to refinance their debts.
Spain sold 6.6 billion euros ($8.5 billion) of debt compared to the planned 4.5 billion and demand for the 10-year bonds in the sale was more than twice the amount on offer. France sold 9.5 billion euros at lower yields to previous auctions.
These results are bullish for both Spain and the broader periphery and stand to further underpin the ongoing 'risk-on' tone, Richard McGuire rate strategist at Rabobank said.
Potential snags as regards Greece's (private sector) deal and Italy's surge in redemptions from February both, however, leave a question mark over how sustainable this positive trend will be. For now, though, the glass half-full brigade have the upper hand, he added.
In commodity markets Brent crude oil rose to around $111.45 on Thursday as risk appetite improved on hopes the euro zone debt crisis was slowly being resolved and on signs of steadier global economic growth.
Spot gold also edged higher on Thursday, on course for a fourth session of gains, rising about 0.3 percent to $1,663.45 an ounce and approaching a one-month high of $1,667.41.