| LONDON, April 3
LONDON, April 3 The rise in European stocks this
week petered on Thursday after figures showed that economic
activity slowed a bit last month and with investors reluctant to
add fuel to the rally ahead of the European Central Bank's
policy decision later in the day.
It was a similar story in debt markets, where the recent
rise in U.S. Treasury yields yields and fall in peripheral euro
zone yields lost much of this week's momentum.
Investors' appetite for risk had been underpinned in recent
days by signs of a post-winter improvement in the U.S. economy,
expectations Beijing will take steps to boost the Chinese
economy and a reduction in emerging market volatility.
On Wednesday the S&P 500 hit a record high and Asian
stocks a four-month peak, while benchmark U.S. 10-year Treasury
yields hit a one-month high and Greek 10-year yields
posted their biggest one-day fall in two months.
The main focus on Thursday is the ECB's policy meeting.
Seventy of 72 economists polled by Reuters expect the ECB to
keep interest rates on hold at a record low 0.25 percent.
But with inflation across the 18-nation bloc falling to a
four-year low of just 0.5 percent last month, the door is open
to further easing, if not today then in the coming months.
"I think actually we need either a rate cut or a specific
liquidity measure today - I think if we just get talk, there
will be a slight negative response," said Ian Williams, equity
strategist at Peel Hunt.
At 0800 GMT the FTSE Eurofirst 300 index of leading European
shares was flat at 1,343 points and Britain's FTSE 100
index was up 0.1 percent at 6,667 points.
Germany's DAX and France's CAC 40 were both
down 0.1 percent at 9617 points and 4427 points, respectively.
The German service sector grew at its slowest pace in five
months in March and Italian services activity shrank, purchasing
managers index data showed on Thursday. Euro zone activity
slowed in March but was solid over the quarter.
Overnight, MSCI's broadest index of Asia-Pacific shares
outside Japan added 0.1 percent, brushing a new
four-month high, and Japan's Nikkei jumped 1.2 percent
to a three-week peak after China cut taxes for small firms and
updated infrastructure spending plans.
In bond markets 10-year German government bond yields inched
up a basis point to 1.63 percent and Greek yields
slipped to a fresh four-year low of 6.16 percent.
Greece plans to return to the bond market in June after a
four-year hiatus during which it was bailed out twice and
defaulted in 2012.
France and Spain will test investor appetite for euro zone
bonds later on Thursday when they auction up to 13 billion euros
Beyond the ECB meeting investors will be looking to U.S.
employment data for March on Friday. Private-sector jobs and
factory orders data on Wednesday strengthened expectations of
another solid report.
In currencies, the yen remained on the back foot as its
safe-haven appeal continued to fade. The dollar traded at 103.95
yen, after briefly touching a 10-week high of 104.075.
"The yen's gains recorded earlier in the year, driven by
external concerns over slowing economic growth in the U.S. and
China and heightened geopolitical risk related to developments
in the Ukraine, are in the process of being reversed," Bank of
Tokyo Mitsubishi analysts wrote in a note on Thursday.
The euro was little changed at $1.3765 against the
dollar and sterling was up 0.1 percent at $1.6640 after
Bank of England governor Mark Carney said interest rates could
rise before May next year
In commodities markets, gold slipped to $1,287 an
ounce, three-month copper on the London Metal Exchange
was down a third of one percent at $6,649.00 a tonne, and Brent
oil was down a quarter of a percent $104.51 a barrel.
(Editing by Toby Chopra)