By Marc Jones
LONDON (Reuters) - World stocks climbed back towards all-time highs on Tuesday as upbeat European earnings helped offset a mixed German business confidence survey and rising worries about a possible Greek default on its bailout loans.
European trading was strong with the pan-regional FTSEurofirst 300 up 0.65 percent and Wall Street expected to open higher, after a 1.4 percent jump by the Nikkei and 2 to 2.5 percent rises in China's main markets had lifted Asia overnight.
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Germany's closely-watched ZEW business confidence indicator dented the gains slightly as 'sentiment' saw its first dip in six months, though a bumper 'current conditions' reading helped cushion the disappointment.
"In macro terms at least, the worst of the crisis looks like it is over for the euro zone and certainly my own 'misery indices' are looking less bad," said Neil Williams, chief economist at fund manager Hermes in London.
Greece remained on investors' radar with media reports that the ECB was considering upping the haircuts it applies to Greek assets used as collateral for its cheap funding.
Even after several rounds of negotiations, hopes are slim that Athens will be able to convince euro zone finance ministers to continue their financial support at the latest in a series of meetings on Friday.
It could mean the country running out of cash by the end of the month. On Monday, the government ordered state entities to park spare cash at the central bank in a bid to pay civil service salaries and IMF loan repayments due in early May.
The euro was hovering at $1.0682 by 1200 GMT, well off Friday's peak of $1.0849, while Greece's 2-year bond yields > were closing in on 30 percent and benchmark 10-year yields > rose to 13.58 percent.
An unprecedented debt default in the currency bloc could open the way for Greece to exit the euro, though ECB Vice President Vitor Constancio said on Monday that a country that defaults would not have to ditch the currency.
Nevertheless investors would rather not have to deal with the uncertainty it would create. "The full extent of a Greek exit (from the euro) is not being priced in," said Grant Peterkin, manager of absolute return bond fund at Lombard Odier.
ONE LOSER
U.S markets were focused largely on first quarter earnings. IBM shares were up 0.7 percent in premarket trading after its earnings exceeded low expectations, while chemical conglomerate DuPont
Underscoring the point, the dollar pushed up for a third straight day, trading at 98.385 against a currency basket. It is now roughly 23 percent higher than it was a year ago.
Moving in the opposite direction, the Australian dollar tumbled to $0.7685 from $0.7723 after the minutes of the Reserve Bank of Australia's (RBA) April meeting showed rate cuts were on the table at the bank.
"The rest of the world is in competitive devaluation mode. So there is only going to be one loser, well it's the winner really I suppose, the dollar," said Lombard Odier's Peterkin.
Oil and gold prices also fell back as the dollar strengthened. Brent dipped to $62.90 per barrel and U.S. crude eased to $55.94, not far from last week's four-month high of $57.42. Copper sagged as well.
Emerging markets continued to be stretched by the diverging moves of the world's top two currencies. Asian, African and Latin American currencies have been forced down by the dollar but eastern Europe in contrast is struggling with the euro's weakness.
Poland's zloty touched a 3-1/2 year high on Tuesday. Russia's rouble continued to fall after a move on Monday to curb its recent rise, while the forint dipped 0.2 percent after Hungary cut interest rates again.
(Editing by Shri Navaratnam and John Stonestreet)
