LONDON -- World equities rose for the third straight day on Friday as investors scooped up beaten-down stocks and the euro held on to the previous session's hefty gains against the dollar.
Crude prices advanced to $75 a barrel, touching a two-week high, and the cost of protection against government debt default in Greece and other peripheral euro zone sovereigns fell in low volumes.
Fears that Greek's financial crisis could infect other euro zone countries had sparked a sell-off in financial markets around the globe.
The euro was flat versus the dollar at $1.237 on Friday. It has fallen 7 percent against the dollar this month and is set to register its sixth consecutive monthly loss.
"The trend is clearly there for more euro weakness and the focus will be on what is happening to the Spanish banking sector and whether there is anything that could ruin this recovery in risk appetite," said Carl Hammer, SEB currency strategist in Stockholm.
"But the market has come to a more mature level (in euro/dollar) and the euro could rebound short-term due to extreme short euro positioning."
The single currency gained more than 1.5 percent against the dollar on Thursday after China reaffirmed its commitment to diversify currency holdings away from the greenback and denied it was reviewing its holdings of euro assets.
Euro gains came despite comments on Friday by a Spanish government spokesman who said talks with unions and business to overhaul Spain's rigid labor laws were going badly, casting doubt over reforms crucial for reassuring markets about the country's long-term solvency.
STOCKS REBOUND
Global equities measured by the MSCI All-Country World Index .MIWD00000PUS advanced 0.7 percent, gaining for the third consecutive day. The index, however, is down 9.1 percent this month, on track for its worst monthly loss since February 2009.
Stocks were also helped by a relatively strong economic picture in the United States and emerging economies, as well as robust corporate earnings.
Europe's FTSEurofirst 300 .FTEU3 index put on 0.4 percent, while Tokyo's Nikkei average .N225 added 1.3 percent in its best one-day performance for two weeks as exporter shares climbed on a halt in the yen's advance.
Some analysts, however, were more pessimistic about the equity market outlook.
"This recovery rally could soon hit resistance on the upside. This week's low point wasn't the capitulation point, so the risk is still on the downside," said Alexandre Le Drogoff, technical analyst at Aurel BGC.
Five-year credit default swaps on Greek government debt fell to 655 basis points (bps), 27 bps tighter than on Thursday, according to CDS monitor Markit.
The CDS of other peripheral sovereign issuers, such as Portugal and Ireland also fell.
Yields on benchmark 10-year Bunds were down 3 bps at 2.686 percent, while those on 10-year U.S. Treasuries were down 3 bps at 3.3237 percent.
© Thomson Reuters 2010
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