European stock bounce counters broader market caution

A strong rebound in Italian bank shares lifted European and world stocks on Monday, putting the brakes on risk-averse moves that had earlier lifted the yen to a 17-month high against the dollar and pushed German bond yields to a one-year low.

Europe's FTSEuroFirst 300 index of leading shares rose 0.8%, Germany's DAX was up 1.3%, France's CAC 40 rose 0.8% and Britain's FTSE 100 was up 0.2%. All had been sharply lower earlier.

U.S. stock futures pointed to a rise of around 0.4% at the open on Wall Street.

As the U.S. first-quarter earnings season kicks off and G20 finance chiefs gear up for talks in Washington later this week on the sidelines of the IMF Spring meetings, investors initially chose to play safe on Monday.

Europe's main indices fell as much as 1%, Japan's yen rose to a 17-month high against the dollar and Germany's 10-year bond yield hit a one-year low.

The dollar's fall to as low as 107.61 yen prompted the Japanese government to warn that it could take steps to weaken the yen's exchange rate. The yen's push higher, and data showing a 9.2% fall in Japan's core machinery orders in February, helped drag the Nikkei 0.44% lower.

But a jump in Italian bank shares ahead of a meeting in Rome between the country's largest lenders, the Treasury and the central bank to set up a rescue fund then lifted European financials and broader indices.

"Reports of a possible system-wide fund announcement this week are promising but we remain cautious until details are announced," UBS analysts said in a note.

"(We're) not particularly excited about this even if it is clearly a positive step .... This newsflow will help a bear market rally on the sector that might be sharp," a trader said.

Italy's banking index was last up 4.7% on the day and is up 13% from last week's three-year low. Still, it has fallen more than 30% so far this year, against a 9% drop for the broader European market.

European stocks have fallen for the last four weeks, and another down week would mark their worst run in almost three years.

Japan's Nikkei ended down 0.4%, but other Asian markets drew support from lower-than-expected Chinese consumer price inflation data which fuelled investor hopes that Beijing will keep monetary policy loose.

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