* Graphic: World FX rates in 2017 tmsnrt.rs/2egbfVh
* ECB, Italy bank rescue, UK election, Comey in focus
* European stocks climb 0.6 pct, euro, pound sag 0.2 pct
* Dollar recovers from knock by yen ahead of Comey testimony
* Oil steadies, Qatar bonds extend falls after S&P downgrade
By Marc Jones
LONDON, June 8 European stocks climbed but the
euro and pound sagged as markets readied for a triple dose of
excitement - an ECB signal of its next moves, a British election
and testimony by the ex-FBI chief Donald Trump fired last month.
Much has been made of the ‘Triple Threat Thursday’
but beyond the commentary on the outside risks from those
events, it was hard to see any real trepidation in prices.
London's FTSE barely budged as UK voters headed to
the polls. Euro zone stocks rose as much as 0.6
percent as signs emerged of another bank rescue, this time in
Italy, and data showed the bloc growing at its
fastest since the ECB started printing money.
The central bank's latest meeting concluded with it
reiterating that stimulus will remain unchanged until the end of
the year, though it also tweaked its stance slightly to remove a
reference to sub-zero rates potentially going lower.
Signs that a snap election in Italy was now looking less
likely accelerated the rally in its stocks and bonds
. Energy shares climbed too as oil recovered from a
5 percent drop the previous day.
After a solid start the pound and the euro
both flagged. Sterling dipped 30 ticks to $1.2940 while the euro
hit a day's low of $1.1220 on the ECB's comments, though that
was just off a seven-month high.
The dollar was beginning to find some traction have spent
most of the morning in a holding pattern. The yen had
landed a glancing blow overnight after stimulus withdrawal talk
from a Bank of Japan policymaker, but the greenback had all but
recovered as focus returned to the day's main events.
Former FBI Director James Comey will be grilled by
Washington politicians later over his statement that President
Trump asked him to drop an investigation of former national
security adviser Michael Flynn as part of a probe into Russia's
alleged meddling in the 2016 presidential election.
Although it keeps pressure on Trump, Wall St markets largely
shrugged it off after Wednesday's written testimony as not toxic
enough to ratchet up the threat of an impeachment.
"To be honest, I'm absolutely staggered about the degree to
which this geopolitical environment and developments are having
absolutely no effect on markets," said Saxo Bank head of FX
strategy John Hardy.
"I'm old enough to remember how nervous the market used to
get about this kind of stuff back in the day. I admit I don't
know how to price it, but it's really staggering."
With the VIX implied volatility index, the markets'
so called 'fear gauge' hovering just above 10 percent, similar
arguments are being made about the UK election and Mario
Draghi's ECB news conference at 1230 GMT.
BATTLE FOR BRITAIN
For the ECB, soundings on downgraded inflation forecasts and
background trepidation about banking sector stability make it
highly unlikely it will conduct any major tightening of policy
before the end of the year.
By tweaking its policy statement and dropping the easing
bias on interest rates, it was a nod at the recent improvement
in the euro zone economy. But by leaving the rest of it largely
unchanged, it showed it is playing things safe.
As for the UK, for all the scenarios of a hung parliament or
Labour-led coalition, the central assumption is for a slightly
increased majority for the ruling Conservatives and averaging
the very diverse opinion poll projections points to the same.
Spot sterling has been firm in recent days, although
the jump in overnight implied volatility readings to some 30
percent – its highest since July – at least shows some pricing
of possible risks over the next 24 hours.
The biggest moves of the week so far remain centered around
ebbing energy prices and inflation outlooks in general.
Brent crude stabilized at $48.50 a barrel in
European trading, after another steep drop briefly below $48
overnight. It is now down more than 7 percent year-on-year.
With inventories showing no easing of the global glut, an
ongoing row between Qatar and its Arab neighbours is seen as
undermining the OPEC consensus about production cuts to limit
Financially, the isolation of Qatar is taking its toll on
the country’s debt and currency markets. Standard & Poor's
downgraded Qatar's debt on Wednesday and Moody's warned on
Thursday that it saw risks too if the situation continued.
The riyal currency held near to an 11-year low in its pegged
band and though stocks bounced more than two percent, Qatari
sovereign dollar bonds extended their losses and the cost of
insuring exposure to the kingdom's debt rose to the highest
level since mid-November.
"We expect that economic growth will slow, not just through
reduced regional trade, but as corporate profitability is
damaged because regional demand is cut off, investment is
hampered, and investment confidence wanes," S&P said.
For Reuters Live Markets blog on European and UK stock
markets see reuters://realtime/verb=Open/url=http://emea1.apps.cp.extranet.thomsonreuters.biz/cms/?pageId=livemarkets
(Reporting by Marc Jones; Editing by Tom Heneghan)