LONDON, Jan 24 (Reuters) - The euro held at a nine-month top against the dollar and global equities bobbed at multi-month highs on Tuesday after reasonable European business activity data and a slew of corporate earnings kept risk appetite buoyant.
Euro zone business activity made a surprise return to growth in January, the latest sign that the downturn in the bloc may not be as deep as feared, according to a survey.
S&P Global's flash Composite Purchasing Managers' Index (PMI), climbed to 50.2 this month from 49.3 in December, the first time it has been above the 50 mark since June.
Britain's flash Composite Purchasing Managers' Index (PMI) however dropped to 47.8 in January from 49.0 in December, the lowest since January 2021.
MSCI's world index was up 0.1% and touched a fresh seven month high, as Europe's broad Stoxx 600 index held steady after shares gained in the U.S. overnight, and parts of Asia earlier in the day.
The MSCI world index is up about 7% since the start of this year, thanks to hopes central banks globally are nearing the end of their interest rate rising programme as well as optimism induced by economic data.
Britain's FTSE 100 was down 0.4%, underperforming the broader European market, and domestically-focussed mid caps gave up early gains after the PMI data to trade near flat.
Most markets in Asia were closed for Lunar New Year for a second day, but Japan's Nikkei closed at a more than one-month high, recovering all its losses since the Bank of Japan's surprise policy tweak last month. Australian shares also rallied.
"We're still pretty Fed-focussed right now, with the meeting coming up next week. The market is of the extremely optimistic view that there will be two rate cuts by the end of the year and I think that's what's keeping sentiment buoyed at the moment," said Fiona Cincotta, an analyst at Cityindex.
"We're watching U.S. PMIs today," she added.
The Federal Reserve's rate setting committee begins its two-day meeting on Feb 1. Inflation has started to come down in recent months, and signs the U.S. economy is slowing could lead the Fed to start thinking about its next steps after a slew of rate hikes last year.
The day's heavyweight on the corporate earnings front is Microsoft which will report its earnings after market close.
Results both in the Unted States and Europe will help guide investors about whether the renewed optimism about the economy that has buoyed equities in recent weeks is grounded in reality.
Those hopes of a better economic outlook in Europe, have also affected currency markets, and, along with suggestions the U.S. Federal Reserve is slowing rate hikes more quickly than European Central Bank, have continued to support the euro and other neighbouring currencies.
The European common currency was steady at $1.0865, just off its nine-month high of $1.0927 hit a day before. Sterling turned negative after the British data and lost 0.25% to $1.234, retreating from Monday's seven-month high.
That left the dollar index at 102.04 , around a six-month low.
Government bonds globally gained a little with the benchmark U.S. 10 year Treasury yield down 3 basis points to 3.4913% . Germany's 10 year yield was down 1 basis point to 2.18%.
Yields move inversely to prices.
Oil largely held onto recent gains from optimism around China's reopening. Brent crude was down 0.1% at $88.1, just off Monday's near eight-week high of $89.09.
Gold was up 0.2%, having earlier hit a new nine-month top, as the precious metal continued to be helped by the weaker dollar.
Editing by Christina Fincher