* German bond yields off new record lows after Ifo
* Euro hits session high vs dollar, two-week peak vs yen
* European share markets reverse early losses
By Catherine Evans
LONDON, April 20 German government bond yields
eased away from record lows hit earlier in the session and
stocks and the euro rose on Friday after the influential Ifo
survey showed a surprise improvement in German business
sentiment in April.
The Munich-based Ifo think tank said its business climate
index, based on a monthly survey of some 7,000 companies, inched
up to 109.9 in April from 109.8 in March, its sixth consecutive
monthly rise and defying expectations for a fall.
The index now stands at its highest level since July 2011, a
further sign that Europe's largest economy continues to outpace
peers and shrug off the effects of the euro zone debt crisis.
German Bund futures erased early gains to stand
flat at 140.62, having eased from a record high of 140.86 hit
before the data release.
The euro rose to a session high against the dollar of
$1.3180 from $1.3148, with option expiries at around
$1.3200 expected to check gains, and struck a two-week peak of
107.57 yen against the Japanese currency.
The FTSE Eurofirst index of top European shares
reversed early losses as banks rebounded, to trade 0.05 percent
higher at 1041.33 and was on track to record its first weekly
gain in nearly a month.
Euro zone banks jumped 1.7 percent, led by France's
BNP-Paribas and Societe Generale after BofA
Merrill Lynch upgraded its recommendation on the stocks.
"At these levels, we believe that the valuation ratios are
factoring in the uncertainties on business model and
profitability related to the upcoming French elections as well
as elevated sovereign risks," BofA-ML said in a note on BNP
Shares in the two lenders had fallen around 20 percent since
the start of the month as new concerns about Spain's fiscal
outlook and uncertainty before a French presidential election,
which begins on Sunday, revived fears about banks' exposure to
euro zone sovereign debt.
Germany's Dax, up 0.4, was the best performer among
national indexes, boosted by the Ifo.
World stocks as measured by the MSCI world equity index
were down 0.2 percent at 324.92 and off around 3
percent for the month.
Riskier assets and commodity-linked currencies had come
under pressure overnight on growing fears about the euro zone
debt crisis and uncertainty over global growth after weak U.S.
unemployment and factory activity data on Thursday.
A weekend featuring a potentially rocky meeting of the
International Monetary Fund, which is seeking to boost its funds
to help contain Europe's problems has heightened market nerves.
Major emerging powers stood ready to pledge money to bolster
the IMF's crisis-fighting war chest, though Brazil was holding
out for promises that their voting power at the global lender
"If Brazil really digs in its heels, I don't think the
market will be too kind to it," Markus Huber, head of German
high net worth trading at ETX Capital. "There has to be unity.
That's the only way investors think the crisis can be
German 10-year yields were at 1.62 percent,
off an all-time low of 1.597 percent hit early on Friday, while
riskier Spanish 10-year yields were close to the
key 6 percent level after breaking above it earlier. A sustained
break of 6 percent in 10-year yields could see Madrid's
borrowing costs accelerate to unaffordable levels.
The cost of insuring Spanish, Italian and other euro zone
debt against a default jumped as fears over Spain's ability to
control its finances generated broader concern about the
Five-year credit default swaps (CDS) on Spanish government
debt rose to 519 basis points, within a few basis points of
record highs hit earlier this week. Italian CDS rose 24 bps on
the day to 479 bps and even the region's more secure issuers
were affected, with Austrian and French insurance costs rising.
The dollar slipped against a basket of major currencies
was also little changed though it gained against the yen
on expectations the Bank of Japan will ease policy
further next week.