Euro zone government borrowing costs slid to new lows on Thursday, a day after the European Central Bank pledged to fulfil its 1 trillion euro bond-buying programme, although regional stocks took a step back from this week's multi-year peaks.
Global stocks, however, touched a fresh record high thanks to renewed strength in Asian markets, while Brent oil surged to its highest this year after figures showed a fall in US production.
Investors also fretted about the deepening crisis in Greece. Credit rating agency Standard & Poor's downgraded Greece and there appeared to be no thaw in the icy rift between Athens and its creditors that would unlock bailout funds and bring the country back from the brink of default.
In early trade Germany's 10-year yield was down almost a basis point at a new low of 0.087 per cent DE10YT=TWEB. The yields on all German government debt out to January 2024 were negative.
Other notable levels included France's 30-year yield falling further below 1 per cent and the yield on two-year Portuguese bonds flirting with going below zero.
"We see no end in sight to any of these trends," said Ciaran O'Hagan, rates strategist at Societe Generale in Paris.
Borrowing costs in peripheral euro zone bond markets like Spain and Italy rose, however, as the prospect of Greece and the euro zone reaching agreement appeared to fade.
This also fed into European stocks, encouraging investors to take profit on the previous day's ECB-fuelled rally to fresh historic highs.
The EuroFirst300 index of Europe's leading 300 shares .FTEU3 was down a quarter of one per cent at 1,645 points, Germany's DAX was 0.8 per cent lower at 12,136 points .GDAXI, while France's CAC40 .FCHI and Britain's FTSE100 .FTSE were both down a quarter of one per cent.
Earlier in Asia, MSCI's broadest index of Asia-Pacific shares outside Japan .MIAPJ0000PUS touched a seven-year high and closed up 1.1 per cent. South Korean, Australian, Chinese and Malaysian stocks gained, pushing the MSCI global index to a new high of 438.99 points .MIWD00000PUS.
Japan's Nikkei .N225 lost 0.1 per cent, and US futures pointed to a slightly weaker open on Wall Street as investors pause for breath after shares posted sizable gains on Wednesday on several strong corporate earnings results.
Lackluster economic indicators have been mostly kind to risk assets this week, with Wednesday's weak Chinese data further boosting expectations of monetary stimulus by Beijing while soft US data has helped by dampening prospects of an early rate hike by the Federal Reserve.
In currencies, the biggest mover on Thursday was the Aussie, lifted to a three-week high as stronger-than-expected Australian employment numbers reduced the odds of an interest rate cut in the next few months.
The Australian dollar was up 0.8 per cent at $0.7745 AUD=D4. [ECONAU]
The euro was 0.5 per cent lower at $1.0630 EUR=, weighed down by ECB President Mario Draghi's commitment on Wednesday to seeing the central bank fulfil its bond-buying programme. This quashed speculation in some quarters that the programme's success could lead to an early "taper".
"From the perspective of the euro we have one clear conclusion: the message from Draghi is that nothing has changed and that we are only at the very start of the QE easing that is coming," said Derek Halpenny, senior currency strategist at BTMU in London.
The US dollar, which neared 121 yen at the start of the week, was up 0.2 per cent against the yen at 119.33 yen JPY= after slipping to 118.79 overnight.
The market will look to US housing data later in the day for further dollar incentives.
A surge in crude oil also supported commodity currencies such as the Canadian dollar CAD=. Crude rallied overnight after government data showed oil inventories in the United States rose less than expected last week. [O/R]
Brent crude LCOc1 rose as much as 5 per cent overnight to a high of $63.10 a barrel, its highest since December last year. It was last trading at $62.60.
US crude CLc1 was at $56.00 a barrel after jumping nearly 6 per cent on Wednesday.