Signs of a gradual acceleration in euro zone growth put the region's shares on course for their best week of the year on Friday and pushed the euro to a three-week high.
Encouraging economic data helped take some of the sting out of disappointing retail and jobless figures in the U.S. on Thursday. Investors also gave a cautious thumbs up to political changes in Italy.
Stocks in Milan <.FTMIB> were Europe's best performers, rising 1.7 percent, compared with a 0.4 percent gain for the pan-European FTSEurofirst 300 index <.FTEU3>. In the debt market, Italian borrowing costs hovered near eight-year lows.
Italy's centre-left leader, Matteo Renzi, forced out Prime Minister Enrico Letta on Thursday after Letta failed to pass major reforms. The new government will be Italy's third in a year, but the hope is Renzi can revive efforts to streamline the euro zone's third-largest economy [ID:nL5N0LI1I6].
"This is not political uncertainty," said BNP Paribas rate strategist Patrick Jacq. "In fact, the political situation in Italy now is clearer."
In the currency market, the eurorose back to a three-week high of 1.3712 it had hit earlier in Asia. Euro zone growth and the events in Italy helped its cause. So did a weakening dollar <.DXY> after Thursday's lacklustre data.
The signs of growth came from fourth-quarter gross domestic product reports in Germany and France, both of which exceeded expectations [ID:nL5N0LJ1J6]. That meant euro zone GDP growth as a whole also beat forecasts - 0.3 percent versus a projected 0.2 percent. That reduced the pressure on the European Central Bank to cut interest rates at its next meeting.
"It's a positive and it takes the pressure off the ECB a bit to ease next month, but they are still left with a few problems," said Deutsche Bank euro zone economist Gilles Moec.
"... Inflation and credit still continue to be problematic so it is not the end of the debate."
Source: Reuters
Encouraging economic data helped take some of the sting out of disappointing retail and jobless figures in the U.S. on Thursday. Investors also gave a cautious thumbs up to political changes in Italy.
Stocks in Milan <.FTMIB> were Europe's best performers, rising 1.7 percent, compared with a 0.4 percent gain for the pan-European FTSEurofirst 300 index <.FTEU3>. In the debt market, Italian borrowing costs hovered near eight-year lows.
Italy's centre-left leader, Matteo Renzi, forced out Prime Minister Enrico Letta on Thursday after Letta failed to pass major reforms. The new government will be Italy's third in a year, but the hope is Renzi can revive efforts to streamline the euro zone's third-largest economy [ID:nL5N0LI1I6].
"This is not political uncertainty," said BNP Paribas rate strategist Patrick Jacq. "In fact, the political situation in Italy now is clearer."
In the currency market, the euro
The signs of growth came from fourth-quarter gross domestic product reports in Germany and France, both of which exceeded expectations [ID:nL5N0LJ1J6]. That meant euro zone GDP growth as a whole also beat forecasts - 0.3 percent versus a projected 0.2 percent. That reduced the pressure on the European Central Bank to cut interest rates at its next meeting
"It's a positive and it takes the pressure off the ECB a bit to ease next month, but they are still left with a few problems," said Deutsche Bank euro zone economist Gilles Moec.
"... Inflation and credit still continue to be problematic so it is not the end of the debate."
