By Sujata Rao
LONDON, July 16 (Reuters) - World stocks hovered around flat
on Thursday despite strong Chinese growth data that provided
reassurance on the global economy for investors bracing for the
spate of U.S. and European corporate results due this week.
As the mood turned cautious, the yen and the dollar rose and
U.S. Treasuries ticked higher, while oil prices were steady
around $61 a barrel following a 3 percent rise in the previous
session.
Three days of strong risk appetite this week have pushed up
global equities <.MIWD00000PUS> 5.5 percent and fuelled gains in
oil, commodities and emerging markets while the VIX volatility
index <.VIX> -- Wall Street's fear gauge -- dropped to levels
last seen in September 2008.
Better-than-expected results from companies like Goldman
Sachs <GS.N> and Intel <INTC.O> added to investors' optimism
over the global economic recovery this week but with a spate of
earnings still to come -- including banking giants JP Morgan
<JPM.N> and Citigroup <C.N> and tech firms IBM and Google
<GOOG.O> -- nervousness is building.
By 0850 GMT the FTSEurofirst 300 <> index of top
European shares was flat, its performance mirrored by London's
FTSE100 <>, Germany's DAX <> and France's CAC-40
<>.
"The market needs to see that recovery is there and that
earnings have bottomed," said Bernard McAlinden, investment
strategist at NCB Stockbrokers in Dublin.
"So far we are getting indications of a better-than-expected
second quarter earnings season, although it's very early."
The mood has faltered slightly after a jump in Asian shares.
Tokyo markets <> hit a one-week high before paring gains
while other Asian shares powered to a month-high with a rise of
over 1 percent before coming off <.MIAPJ0000PUS>.
Markets were buoyed early in the session by China's second
quarter gross domestic product which rose 7.9 percent against
the previous year, beating forecasts for a 7.5 percent rise.
The world's third-largest economy also grew 7.1 percent in
the first half versus a year earlier.
Coming on top of better-than-expected U.S. data and
corporate results, the news suggested to investors that the
recession is abating. But trepidation about the upcoming results
kept a lid on market gains.
"We're seeing a bit of profit-taking in risk assets after a
few days of gains on stock markets," said Elisabeth Andreew,
currency strategist at Nordea in Copenhagen.
"There is a concern that a lot of the positive news may
already be priced in and also nervousness ahead of some big U.S.
companies reporting earnings," she said, adding that currency
markets were taking their cue from equities.
By 0758 GMT the dollar had fallen 0.5 percent against the
yen to 93.73 yen <JPY=> while the euro was down 0.6 percent to
132.19 yen <EURJPY=>. Against the dollar, the euro fell 0.1
percent to $1.4096 <EUR=>.
SOBERING NOTE ON NEW ZEALAND
The day's loser was the New Zealand dollar.
Fitch sent a sobering message to global markets, cutting the
outlook on New Zealand's 'AA-plus' rating to negative, citing
the country's high debt levels and pushing the NZ dollar down
1.2 percent to $0.6413 <NZD=>.
"This was a bit of a surprise. It may refocus attention on
concerns about sovereign risk that had been receding for a
while," said Masafumi Yamamoto, head of FX strategy Japan at
Royal Bank of Scotland, referring to sovereign ratings in
general.
Markets are also keeping a wary eye on the fate of CIT Group
Inc <CIT.N>, a U.S. lender to thousands of small and mid-sized
businesses, after bailout talks with the government ended, a
move that could drive it to bankruptcy. []
U.S. Treasuries benefitted from the renewed demand for less
risky assets, with 10-year yields <US10YT=RR> at 3.5747 percent,
down nearly four basis points from U.S. trade but up from a
two-month low of 3.26 percent hit on Monday.
Corporate results apart, markets are also waiting for weekly
U.S. jobless claims to see how the employment picture is shaping
up in the world's biggest economy.
(Additional reporting by Elaine Lies in Tokyo, Jessica
Mortimer and Brian Gorman in London; Editing by Ruth Pitchford)
