World stocks stabilised near the previous session's nine-month high on Thursday after forecast-beating earnings from major firms boosted expectations for a global economic recovery. Swiss bank Credit Suisse's higher-than-expected second-quarter profits and drugmaker Roche's bullish two-year forecast followed solid reports in the United States from Apple and Starbucks on Wednesday.
Reflecting improving risk appetite, the premium investors demand to hold perceived higher risk euro zone debt, issued by countries other than Germany, fell further.
The spread between 10-year Italian and German yields fell to its lowest since late May while the equivalent Greek spread hit the lowest since mid-November. The Irish equivalent hit its lowest since early June.
"Risk appetite is in play right now and we're seeing that in the spreads to Germany and reflected in terms of Bund yields moving higher," said Calyon rate strategist Orlando Green.
MSCI world equity index was up 0.1 percent on the day, having hit its highest level since mid-October on Wednesday.
The index has risen nearly 5 percent this month, bringing year-to-date gains to 12.7 percent.
The FTSEurofirst 300 index erased early losses to hold steady on the day.
Emerging stocks were up 0.8 percent. U.S. stock futures are up around 0.2 percent, pointing to a firmer open on Wall Street.
According to Thomson Reuters data, firms on the S&P 500 index are expected to see their earnings contract by 31.7 percent in the second quarter.
The contraction rate is expected to ease to 21.0 percent for the third quarter before swinging back to growth in the final three months of the year.
U.S. crude oil was down 0.7 percent to $64.90 a barrel.
TIGHTENING SPREADS
The September bund future fell 18 ticks as firm equities encouraged outflows from safe-haven government bonds.
The spread between 10-year Italian and German yields fell to 89 basis points, according to Reuters charts. The equivalent Greek spread tightened to 135 bps and the 10-year Irish spread hit 187 bps.
"We are overall seeing a continued improvement in risk appetite and that's benefitting peripheral issuers," said Nick Stamenkovic, bond strategist at RIA Capital Markets.
The low-yielding yen was under pressure with investors watching for yen selling related to launches this week of Japanese investment trusts which will invest in overseas assets and foreign currencies.
The dollar rose 0.8 percent to 94.44 yen. It was steady against a basket of major currencies just off the previous day's seven-week low.
