World stocks and commodity prices rose on Thursday after China's central bank reaffirmed its commitment to "appropriately loose" monetary policy and European company earnings cheered investors.
The dollar and government bonds fell.
Worries that the People's Bank of China might be prepared to tighten lending had spooked investors who had banked on continuing loose monetary policy helping revive both domestic and global growth. On earnings, British telecoms group BT posted a better-than-expected 3 percent fall in first-quarter adjusted core earnings while Volkswagen's second-quarter operating profit beat expectations.
"The market looks as if it will continue to push higher on the back of better corporate earnings and a more benign economic outlook," said Manoj Ladwa, senior trader at ETX Capital, in London.
"But a lot of the improvement in corporate performance has been down to cost cutting, stock market volumes are still low, confidence is fragile and there are a growing number of bears." Global equities were in demand on Thursday, with the MSCI world equity index advancing 0.6 percent after two days of loss.
The global index is up 7 percent this month after losing 0.7 percent in June to break a three-month winning streak.
In Europe, the FTSEurofirst 300 index rose 1.2 percent, while Japan's Nikkei average put on 0.5 percent, hitting its highest close in nine months, and Chinese stocks gained 1.7 percent after a 5-percent sell-off on Wednesday.
BT shares soared more than 10 percent and those for Volkswagen gained 4.4 percent.
EARNINGS IMPROVED
According to Thomson Reuters data, the second-quarter blended earnings growth rate for DJ STOXX 600 improved to -40.4 percent on Wednesday close from -43.9 percent a week ago. So far 95 companies have reported, of which 50 beat estimates, two matched and 43 missed, the data showed.
U.S. stock index futures rose 0.8 percent, indicating a higher start for Wall Street ahead of the release of weekly jobless claims.
German unemployment unexpectedly fell for the first time in nine months in July, aided by government measures ahead of September's federal election, while euro zone economic sentiment increased in July to its highest level in eight months, signalling the economy is bottoming out
Metal prices rose, with copper regaining some ground following a sell-off in the previous session.
Crude prices advanced above $64 a barrel after sliding almost 6 percent the day before on data showing a jump in U.S. crude stocks.
The euro was up 0.3 percent at $1.4077.
"The (euro zone economic sentiment) was pretty much bang in line with expectations and helped the euro tick up against the dollar," said Simon Derrick, head of currency research at Bank of New York Mellon.
"But people are looking for more meaningful signs that the recovery in the second half is sustainable, and the market is gradually swaying toward a more defensive stance."
Yields on the benchmark 10-year U.S. Treasury rose 3 basis points at 3.694 percent, while the 10-year euro zone benchmark bund yield was up 2 basis points at 3.45 percent.
