LONDON - Bets on more central bank support kept European shares at a two-month high and the region's bond yields at record lows on Tuesday, as oil prices hovered at just under $80 a barrel ahead of an OPEC meeting this week.
Markets were still trying to catch their breath after a hectic few days of sharp share rises, currency swings and new lows for euro zone bond yields following strong easing signals from ECB head Mario Draghi and a surprise Chinese rate cut.
Asian stocks had dipped despite another record high for Wall Street overnight, and Europe's bourses also saw a subdued start with Britain's FTSE 100, Germany's DAX and France's CAC 40 all barely budged in early trading.
Euro zone government bond yields also held at record lows and the euro pottered in a $1.2430-40 range with financial markets lulled by European Central Bank President Draghi's vow to lift inflation by whatever means necessary. [GVD/EUR]
"We have had fresh signs of easy money coming from China and strong signals from Mario Draghi and the ECB and that is what driving markets at the moment," said Kerry Craig a global markets strategist at JP Morgan.
"There are real risks of recession and deflation, but there are also reasons to believe that 2015 will be a better year for the euro zone than this year has been."
German data showed a rise in private consumption helped its economy - Europe's biggest - avoid recession last quarter, while France saw a better-than-expected rise in business morale.
"These results go in the right direction, they must now be consolidated in the coming months," said French Finance Minister Michel Sapin.
Among the region's central bankers, the debate over further easing appears to be continuing. France's ECB member Christian Noyer said in Tokyo the central bank's statements about boosting its balance sheet by around 1 trillion euros were an expectation rather than a firm commitment.
That followed Bundesbank chief Jens Weidmann's warning on Monday that government bond buying, which economists hope would boost the euro zone economy, would face legal hurdles.
The yen rose after Bank of Japan minutes showed the hurdle to further quantitative easing was high as the dollar struggled to make much headway before a second reading of US growth data later.
Australia's dollar, in contrast, hit a four-year low after Reserve Bank of Australia (RBA) Deputy Governor Philip Lowe said the currency was overvalued and he expected it to fall.
Oil prices remained the other key focus for financial markets as they held at just under $80 a barrel.
They have fallen almost 30 per cent since the middle of the year and pressure is on the Organisation of the Petroleum Exporting Countries (OPEC) ahead of what is shaping up to be a landmark meeting in Vienna on Thursday. [O/R]
"The reduced leverage that OPEC now has over the oil market is likely to make it more cautious about cutting production," strategists at Barclays said in a note.
"The rapid growth being achieved in non-OPEC production means it faces the risk that even a large cut to supply may not be enough to support prices and could simply result in lost market share and revenue," they added.
Russia, which needs higher oil prices to support its economy, tried to sway OPEC to slash production, suggesting Moscow could cut its own crude output.
With oil holding steady again, the bruised rouble extended its rebound to a fifth straight day, though the dollar-based RTS stock index dropped 1.7 per cent and the rouble-based MICEX was down 0.6 per cent.
Safe-haven gold meanwhile nudged up to $1,200 an ounce after small losses in the previous session, as traders eyed the dollar and a Nov. 30 Swiss referendum on central bank gold reserves.