* Europe stocks set for biggest weekly gain since Feb
* Bets on looser ECB policy keep Bund yields near 1 pct
* Crude oil holds near 13-month lows
By Nigel Stephenson
LONDON, Aug 15 European stocks rose on Friday
and were on track for their biggest weekly gains since
mid-February, while German Bund yields held near record lows as
recent weak data increased expectations for central bank action
to lift the economy.
The euro, which took a hit on Thursday after data showed
Europe's powerhouse economy Germany unexpectedly contracted in
the second quarter, edged up against the dollar on Friday but
remained near nine-month lows.
"Given the recent data flow I guess some market players
consider there is a high probability of QE in Europe," said
Gilles Moec, an economist at Deutsche Bank in London.
Investors also kept a wary eye on the progress of a Russian
aid convoy halted on the border with Ukraine.
Comments perceived as conciliatory from President Vladimir
Putin helped lift Wall Street on Thursday, along with weak jobs
data suggesting the Fed would not raise interest rates soon.
On Friday, the pan-European FTSEurofirst 300 index
rose 0.4 percent in early trade, set for gains for the fourth
time in five days, helped by the world's biggest miner, BHP
Billiton saying it could spin off assets.
The index is up 2.2 percent for the week, a performance not
matched since the week ending Feb. 14.
Sub-par economic data, which also showed the entire euro
zone stagnated in the three months to end-June and inflation was
just 0.4 percent in July, has helped drive German 10-year bond
yields to record lows below 1 percent this week and led
investors to raise their bets on the European Central Bank
launching a large-scale bond-buying programme at some point.
Ten-year German yields, which have also been
pushed lower by investors concerned about conflict in Ukraine
and the Middle East seeking a safe assets, were all but flat on
Friday at 1.013 percent, having briefly dipped below 1 percent
the previous day, according to traders.
Yields have fallen for six weeks in succession.
The euro was up 0.1 percent at $1.3373 but still
close to last week's nine-month low of $1.3333 and on track to
end lower for the week. However, some analysts saw the euro
pausing at these levels.
"With plenty of bad news from the euro zone behind us and
investors adjusting their expectations lower, it may be more
difficult for euro/dollar to fall from here, based on bad news
from the euro zone only," said Petr Krpata, analyst at ING.
The dollar was up at 102.54 yen and sterling, which
fell earlier this week after the Bank of England made it clear
it was in no hurry to raise interest rates, held steady at
$1.6684, having hit a four-month low of $1.6657 on Thursday.
Earlier, Asian equities made modest gains. MSCI's main index
of Asia-Pacific shares outside Japan added 0.3
percent. Tokyo's Nikkei index ended flat but with a 3.7
percent gain for the week, its biggest since mid-April.
U.S. stocks rose on Thursday, with the S&P 500 index
ending 0.43 percent higher.
Traders said Putin's remarks that Russia would stand up for
itself but not at the cost of confrontation with the outside
world, had eased pressure on the market.
U.S. Treasury yields remained close to recent lows. The
10-year note yielded 2.394 percent, unchanged from
the New York close.
Worries about economic weakness and potential demand for oil
weighed on Brent crude. The price edged up $102.31 a
barrel due to weakness in the dollar but held close to 13-month
Gold rose about 0.1 percent to $1,313 an ounce and
set for a second consecutive week of gains on safe-haven demand.
(Additional reporting by Marius Zaharia and Anirban Nag in
London, Blaise Robsinson in Paris and Lisa Twaronite in Tokyo)