World stocks rose for the ninth day running on Friday, extending a modest rally, and the euro held at three-week highs as the worst fears about euro zone sovereign debt receded.
World stocks rose for a ninth day running on Friday, extending a modest rally, and the euro held at three-week highs as the worst fears about euro zone sovereign debt receded.
Banks were among the biggest gainers in Europe as investors welcomed a commitment from European Union (EU) policymakers to publish ''stress tests'' revealing the true financial health of the region’s biggest lenders.
MSCI's all-country world index gained about 0.2%, allowing US and European shares to retrace all their losses for this year.
The index has now rebounded around 7% since its June 7 close and gained more than 3% this week.
Its emerging markets counterpart outperformed it and was up more than half a percent.
Investors have gradually been moving back into riskier assets this month after a sharp correction in May made valuations more attractive and key volatility gauges, such as Wall St's Vix index, almost halved from mid-May peaks.
Soothing investor tensions further, Spain’s treasury managed to sell €3.5 billion of debt on Thursday, which a government official said gave it enough liquidity to deal with a €24 billion ($29.4 billion) repayments crunch in July.
In addition, EU leaders and officials on Friday firmed up plans to publish bank "stress tests" next month as they looked to minimise adverse speculation that has been dogging the sector all year.
Societe Generale, BBVA, and Credit Agricole were up 1.4-2.7% in a higher bank sector. "There has been a slight change in sentiment," said Mike Lenhoff, chief strategist at Brewin Dolphin Securities, in London.
"It looks like the EU policy effort is beginning to come to fruition. Apart from the financial stability programme, I quite like the idea of the stress test for the banks. Markets have been oversold, giving a buying opportunity."
European stocks were 0.3% higher at midday. Japan’s Nikkei ended flat but had its biggest weekly rise in three months. The dollar was little changed against a basket of currencies and on the euro. US stock futures were flat.
"Financial system concerns have eased, and some players are re-establishing carry trades, seeking higher-yielding assets," said Lee Hardman, currency economist at Bank of Tokyo-Mitsubishi UFJ, summing up the mood.
Fund tracker EPFR Global reported that more than $37 billion flowed out of money market funds during the latest week and into high-yield and emerging market bond funds and global equity funds.
Emerging market equity finds saw the most net inflows in 10 weeks.
The euro held at three-week highs, on track for its second straight week of gains. It was near $1.24 as investors shed short positions after solid demand at the Spanish government bond auction.
The single currency has gained more than 2% so far this week, pulling further away from a four-year low of $1.1876 struck on June 7.
On debt markets, two-year bond yields were 3 basis points higher at 0.546%, with 10-year yields up the same at 2.702%.
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