By Jeremy Gaunt, European Investment Correspondent
LONDON, Feb 14 (Reuters) - Equity markets rose sharply and
riskier currency bets came back onto the table on Thursday as
investors celebrated signs of improvement in the economic
outlook for the United States and Japan.
European shares gained around 1 percent while Japan's Nikkei
average <> closed up 4.3 percent, its biggest one-day gain
in six years.
The catalysts for the moves were Wednesday's U.S. retail
sales data, which came in better than expected to ease fears of
a consumer spending collapse, and much stronger-than-forecast
fourth-quarter Japanese growth, reported earlier on Thursday.
said Yoshihiro Ito at Okasan Capital Management.
Japan's economy expanded by 0.9 percent in the fourth
quarter, more than double forecasts.
News was also relatively bullish on the corporate earnings
front. French automaker Renault <RENA.PA>, for example, beat its
2007 profit margin target and said it expected to sell over 10
percent more vehicles in 2008 compared with 2007.
The pan-European FTSEurofirst <.FTEUS> was up 0.9 percent.
MSCI's main world stock index <.MIWD00000PUS> was up 1.1
percent. Emerging market equities, as measured by MSCI <.MSCIEF>
gained 2.5 percent.
German economic prospects were something of a dampener,
however, with fourth-quarter GDP growth being reported at less
than half that of the third quarter.
But the data was in line with expectations.
CURRENCY RISK
The euro rose to a one-week high against the dollar while
Japan's yen was generally weaker as risk appetite improved.
"Currency markets generally will take their lead from the
general risk appetite tone," said Paul Robson, currency
strategist at RBS Global Banking.
The euro was up 0.4 percent against the dollar at $1.4621
<EUR=> -- highs seen a week ago.
The dollar was little changed versus the Japanese currency
at 108.27 yen <JPY=> but held just off a one-month peak near
108.37 yen set a day earlier. The euro was 0.3 percent higher
at 158.32 yen <EURJPY=>.
The Japanese currency usually benefits from a risk averse
mood as currency investors tend to exit risky carry trade bets
funded by cheap borrowing in the yen, but fall when risk
appetite improves.
Euro zone government bond prices were generally lower,
depressed by the better global economic prospects and the equity
market gains.
"We're at levels now where we need continuing bad news, and
plenty of it, to rally further," said RBS rate strategist Andy
Chaytor.
Two-year euro zone government bond yields <EU2YT=RR> were at
3.17 percent, up 2 basis points, while 10-year yields
<EU10YT=RR> were flat at 3.99 percent, having touched a high of
4.009 percent.
