* EU forecasts recession for euro zone
* Euro back off 10-week highs, shares ease
* Oil prices gain, Brent above $124 a barrel
By Richard Hubbard
LONDON, Feb 23 Rising oil prices and
forecasts showing the euro zone economy shrinking this year
weakened European stock markets on Thursday and pulled the
single currency back from 10-week highs.
More upbeat data from Germany had given shares a boost in
early trade and U.S. stock futures still pointed to a firmer
open, with attention focused on data expected to show a slight
rise in U.S. weekly jobless claims.
But the European Commission's half-yearly forecast showed
output in the 17 nations sharing the euro will contract by 0.3
percent and the broader EU bloc stagnate, putting markets back
in negative territory.
"With Germany back to growth, weaker countries can benefit
from increased demand for imports and should also return to some
expansion later this year. However, ongoing austerity will
continue to hold back economic growth," said Christian Schulz,
an economist at Berenberg Bank in London.
Investors are still struggling to put aside concerns about
Greece and the conviction that a long-awaited second bailout
agreed on Monday does not mark the end of Athens' or the broader
euro zone's debt crisis.
The lack of growth makes it harder for governments to meet
budget targets and reduce the levels of debt which have so
Still, the euro was up 0.4 percent at $1.3294, after
hitting an earlier high of $1.3343 on the back of the German Ifo
survey of business, which rose for a fourth month and was its
strongest since mid-December.
The FTSEurofirst 300 index of top European shares
was down 0.1 percent at 1076.50, while the MSCI world equity
index was about 0.1 percent higher at 329.55.
While the U.S. economy has been showing encouraging signs,
growth momentum in Asia is slowing and economists worry that
rising oil prices, linked to growing tension with Iran, will
undermine efforts to put global growth on a stronger footing.
Oil prices, which soak up cash from both household and
company budgets, rose to nine-month highs just over $124 a
barrel. Because of weakness against the dollar, when
converted into euros that represents an all time high of 93.60
euros a barrel.
"The negative impact (of the rising price of oil) is likely
to be even greater on European economies because of
domestic currency weakness," Lee Hardman currency economist of
Bank of Tokyo-Mitsubishi UFJ.
"The price of Brent crude oil priced in euros ... will
provide another building headwind to growth in the region."
U.S. crude futures for April were 15 cents firmer at
$106.43 after climbing to a nine-month high of $106.28 a barrel
the previous day. Brent crude for April delivery was up
$1.27 at $124.17.
The doubts about the ability of Greece to implement the
tough austerity measures needed to qualify for a
130-billion-euro bailout package and avoid defaulting on its
debt continued to weigh on debt markets.
The Greek parliament was expected to endorse a debt swap
with private bondholders later in the day that forms the core of
the bailout package, despite new protests against tough budget
cuts demanded in return for the rescue deal.
German government bond futures were 24 ticks higher
at 138.77 in nervous trading, while 10-year cash yields
were slightly higher just over 1.90 percent.