* Stocks edge up as growth fears, bonds counter Q1 results
* Investors await signals from ECB on stimulus wind down
* U.S. 10-year yield back below 3 pct
* Dollar index drifts off 3-1/2-mth high
* Euro stuck near 1-1/2-mth low
By Sujata Rao and Marc Jones
LONDON, April 26 (Reuters) - European stocks and the euro made tentative gains on Thursday as a drop in bond market stress levels helped sentiment ahead of a read out from the European Central Bank’s latest meeting.
A sharp sell-off in bonds over the last week has been pushing up global borrowing costs, meaning there is more focus than ever on when the ECB ends its 2.55 trillion euro ($3.2 trillion), three-year stimulus programme.
For now it is keeping things steady, the ECB confirmed .
European equities were up 0.4 percent ahead of Mario Draghi’s 1230 GMT news conference and as MSCI’s most widely-followed gauge of world stocks pulled out of its longest losing streak of the year so far.
This happened as 10-year U.S. bond yields drifted back below the psychologically significant 3 percent mark and Wall Street futures pointed fractionally higher with another heavy dump of first quarter earnings coming up from companies such as Amazon, Microsoft and Intel.
Asia also rose overnight as record quarterly profits from Samsung helped offset nerves in China after reports that U.S. prosecutors have been investigating whether Chinese tech giant Huawei violated Iran sanctions.
Oil was back on the rise, feeding what are likely to be questions for the ECB on rising inflation and supported by expectations of renewed U.S. sanctions on Iran and declining output in crisis-hit Venezuela.
“The music is still playing and we are still dancing, but we are reducing risk,” said Pau Morilla-Giner, chief investment officer at London & Capital. “The worry is about an overheating, leading to a rise in inflation, higher interest rates which bring on a textbook recession.”
The U.S. Dow Jones bluechip index had snapped a five-day losing streak on Wednesday, thanks to strong corporate earnings. The Nasdaq was expected to benefit on Thursday after forecast-beating after-market results from data-scandal hit Facebook.
Europe’s rises dragged it of one-week lows, though a mixed set of earnings weighed, including a 79 percent drop in profit at Deutsche Bank.
The reaction from its new chief executive, Christian Sewing, was to order cut backs in bond and equities trading in its long-troubled investment bank.
At the day’s main event, the ECB kept its policy unchanged as was widely expected, but focus will be on a news conference by the bank’s chief, Mario Draghi, for any hint about winding up the ECB’s powerful stimulus this year.
An 11 percent oil price rise this year, on top of last year’s 18 percent jump, is increasing inflation levels and some of the bank’s top policymakers have said they expect the recent soft patch in euro zone economic data to pass. “The Governing Council confirms that the net asset purchases, at the current monthly pace of 30 billion euros, are intended to run until the end of September 2018, or beyond, if necessary,” the ECB’s policy statement said.
Credit Agricole strategist Orlando Green said: “The risk is that he (Draghi) is less dovish than expected.”
That could lift the euro which has sold off in recent days against the dollar to approach its March 1 level of $1.2154. It fetched $1.2185 before the ECB meeting as the dollar saw only its second drop in eight sessions.
Sweden’s central bank remained dovish at a policy meeting, pushing the crown to its lowest versus the euro since late-2009 .
The breather for the dollar helped emerging market currencies regain some ground having been almost universally whacked by the combined yield and dollar rise over the last week.
Yields on 10-year U.S. Treasuries, the reference rate for global borrowing,, have risen around 25 basis points since early-April and are now hovering at four-year highs.
That, alongside the rise in commodity prices has led companies such as Alphabet to warn of surging costs while heavy equipment maker, Caterpillar said its buoyant first-quarter earnings could be the “high water mark”.
While 81.2 percent of U.S. earnings have beaten consensus estimates and Thomson Reuters data projects first-quarter earnings growth at 22 percent, investors fear similar warnings from other companies.
“We have been on a real high with corporate profitability so people got psyched up about those numbers getting even better,” said Peter Lowman, CIO of UK-based wealth manager Investment Quorum.
“But with Treasury yields rising, people are worrying we may be peaking on profits, or if GDP growth is peaking and we are now in a situation where markets are getting very nervous,” he said, adding that the U.S. Federal Reserve appeared to be in no mood to brake its rate-hike programme.
Reporting by Sujata Rao, additional reporting by Shinichi Saoshiro in Tokyo, Marc Jones and Dhara Ranasinghe in London Editing by Hugh Lawson and Edmund Blair