* European stocks hit 2 1/2-week highs on euro zone PMI
* Russian debt insurance costs rise on EU sanctions
* Emerging-market stocks at 17-month highs after China PMI
* US tech stocks buoyed by Apple; Facebook at record high
By Carolyn Cohn
LONDON, July 24 European stocks hit 2 1/2-week
highs and the euro rallied from eight-month lows against the
dollar on Thursday after the region's private sector expanded at
its fastest rate in three months in July.
Russian debt insurance costs rose after European Union
leaders proposed sanctions on Russian banks which are
majority-owned by the government. Those measures were proposed
after a Malaysian Airlines plane was downed over Ukraine last
week, killing 298, possibly by a missile furnished by Russia.
European stocks rose 0.4 percent and the euro
hit the day's highs at $1.3484, pulling off eight-month
lows, after Markit's Composite Purchasing Managers' Index (PMI)
of companies across the euro zone, a good early indicator of
overall growth, rose to 54.0 in July from 52.8, its highest
since April. Any number above 50 indicates expansion.
The services sector across the 18-member bloc performed
better than any of the 39 economists polled by Reuters had
forecast. Manufacturers also reported a stronger month than the
median Reuters forecast had predicted.
"The activity data offsets some of the weakness we saw last
month and that has helped the euro," said Geoff Yu, a currency
strategist at UBS.
The dollar index dropped from an earlier six-week
peak, although the U.S. currency hit a one-week high against the
yen at 101.64.
Russia's five-year credit default swaps rose 17 basis points
to 214 bps from earlier on Thursday, according to Markit,
following the EU sanctions proposals, which the EU said were
likely to be adopted next week.
That means it costs $214,000 a year for five years to insure
$10 million of Russian debt against default. Russian government
"If the Europeans do manage to pass some of the new
sanctions that are being talked about, and it's a big if, then
it really would be a big step for Europe," said Viktor Szabo,
portfolio manager at Aberdeen Asset Management.
Emerging-market stocks rose 0.25 percent to
17-month highs after stronger-than-expected HSBC flash PMI data
for China, the world's second-largest economy.
The index came in at 52.0 for July, well above forecasts and
the highest reading in 18 months. There was also good news on
the outlook, with a sub-index of new orders reaching 53.7.
U.S. stock futures were indicating a
higher open on Wall Street after the S&P 500's record close on
Wednesday. Those gains were powered by Apple Inc, while
late trading was dominated by Facebook Inc, whose shares
rose 5.5 percent after hours when its results beat forecasts.
A better-than-expected U.S. earnings season is helping
sentiment generally. Barclays estimates that of the 22 percent
of S&P 500 companies that have reported quarterly results since
July 1, 64 percent beat earnings expectations and 65 percent
beat revenue estimates.
The prospect of more sanctions against Russia over the
Ukraine crisis maintained a safety bid for high-rated bonds.
For U.S. Treasuries, investors were buying more liquid
shorter-dated paper, nudging two-year yields below
0.48 percent. But German Bund yields, which have
been trading near record lows, edged up on the euro zone data to
Gold eased to 1,298.30 an ounce, close to earlier
Crude oil prices ran into renewed selling after a bounce on
Wednesday. Brent crude for September delivery fell 26
cents to $107.77 a barrel. U.S. crude lost 28 cents to
(Additional reporting by Marc Jones and Anirban Nag in London
and Wayne Cole in Sydney; Editing by Larry King)