Global stocks rose on Friday, absorbing further gains in U.S. and euro zone government bond yields ahead of U.S. inflation data, while the yen sank after the Bank of Japan left interest rates on hold.
Energy stocks outperformed after oil spiked above $71 a barrel overnight and merger and acquisition speculation buoyed British retailers after a Qatari investment fund increased its stake in J. Sainsbury , sending its shares up 5 percent.
The yen hit a 4-1/2 year low against the dollar after BOJ Governor Toshihiko Fukui gave no clear guidance on future rate hikes, surprising some investors who had been expecting him to pave the way for a rate hike later this summer.
The market had been assuming there would be a rate hike at the August meeting but (Fukui's comments) suggest that it was not a done deal which the yen didn't like, said Adam Cole, senior currency strategist at RBC Capital Markets.
The yen traded as low as 123.33 per dollar according to Reuters data, and hit 164.22 to the euro, not far from an all-time low of 164.61 yen.
The euro was little moved at $1.3317, having hit a near three-month low earlier this week.
BOND YIELDS RISE
Investors have been buying dollars as expectations of interest rate cuts from the Federal Reserve have evaporated in the face of strong data, adding to pressure on government bonds from higher global interest rates.
Yields on euro zone government bonds edged higher again on Friday, with the 10-year Bund yielding 4.67 percent, up about 80 basis points since mid-March when markets were worried about a sharp global slowdown.
Concerns about rising rates -- which drove U.S. Treasury yields to 5-year highs this week -- still lingered but benign U.S. data producer prices data released on Thursday helped sooth fears over inflation.
Markets are now braced for key consumer price data due at 1230 GMT. Analysts polled by Reuters expect May prices to have risen 0.6 percent, while core prices excluding volatile food and energy are seen up 0.2 percent.
COMMODITIES LIFT STOCKS
Oil prices soared back above $71 a barrel overnight, propped up by concerns over low fuel production from U.S. oil refineries and a flare-up of violence in the Middle East.
London Brent crude , seen as the best global indicator for oil, was down 34 cents at $71.02 a barrel as markets paused for breath after a two-day rally.
Base metals firmed and gold extended its recent gains. Spot gold traded at $652 an ounce.
Oil and gas stocks were among the biggest positive influences in Europe, helping boost the FTSEurofirst 300 0.4 percent to 1,612.2 points.
Stocks have come under pressure from rising bond yields in the past two weeks, but most strategists still see reasonable value in equities.
A look at prior European profits cycles tells us we still have two to three years of healthy profits growth left and equities have yet to re-rate, Merrill Lynch European strategist Karen Olney said.
Earlier, Japan's Nikkei average rose 0.7 percent to end at a 1-week high, boosted by exporters such as Honda Motor as the yen dipped. Honda gained 1.9 percent.
The cheap yen is the most positive factor for the stock market. It's a boost for the Japanese economy. The Nikkei average is like the index for exporters, said Masayoshi Okamoto, head of dealing at Jujiya Securities.
South Korea's benchmark KOSPI crept to another record high with a gain of 0.2 percent while MSCI's broadest index of shares in Asia excluding Japan was up 0.8 percent.