(Reuters) - The euro jumped against the dollar and yen on Thursday and safe-haven German bond prices fell as signs of strong demand at a Spanish debt auction lifted sentiment toward riskier assets. Oil prices also gained, though partly from concerns about supplies being affected by the upsurge in military activity in Algeria and Mali. But the main focus was on Spain's success in selling 4.5 billion euros ($6 billion) of new bonds at a lower cost than in the previous auction, signaling growing confidence among investors in the outlook for the recession-hit euro area. "It is a reflection of strong liquidity and improved sentiment towards (euro zone) peripherals," said Alan McQuaid, chief economist at Merrion Stockbrokers in Dublin. Confidence in the euro zone has risen since European Central Bank President Mario Draghi made upbeat comments about the outlook last week after promising in 2012 to support the debt of any struggling country in the currency bloc that was willing to reform its economy. "Overseas investors are returning back to the peripheral bond markets, including from the U.S., because of the ECB backstop for peripherals," Nick Stamenkovic, Fixed Income Strategist, RIA Capital Markets. Accommodative monetary policies from the world's major central banks and signs that the growth in the U.S. and Chinese economies is picking up have also supported investment flows into riskier assets and away from safe havens. German Bund futures fell as much as 55 ticks to 142.82 after the auction, while, as prices fell on cash bonds, 10-year German yields rose to 1.53 percent.. Spanish 10-year yields were 3 basis points lower at 5.03 percent, with equivalent Italian yields 5 bps down at 4.15 percent. The euro hit a high of $1.3363 against the dollar for a gain of 0.6 percent after the debt sale. The common currency was also up 1 percent against the yen at 118.75 yen, which is not far from the 20-month peak of 120.13 hit on Monday. The euro and the dollar were already higher against the yen on Thursday after a Japanese government minister said his recent comments on the negative impact of a weak yen had been misinterpreted. The yen has been falling ahead of a Bank of Japan meeting next week when policymakers are widely expected to adopt a 2 percent inflation target and perhaps extend the current asset purchase program. SHARES CAUTIOUS In the equity markets, a massive $14 billion writedown at global mining giant Rio Tinto and fears that weak growth in the fourth quarter of 2012 will result in poor corporate results was keeping price gains in check. The FTSEurofirst 300 index .FTEU3 of top European shares slipped nearly 0.1 percent to 1,159.00 points in early trade. London's FTSE 100 .FTSE, and Frankfurt's DAX .GDAXI were 0.1 to 0.3 percent lower, but Paris's CAC-40 .FCHI rose 0.4 percent. The MSCI world equity index .MIWD00000PUS was little changed overall after Asian shares outside Japan .MIAPJ0000PUS fell 0.2 percent, extending declines for a third session. The falls were led by Chinese stocks as investors retreated ahead a slew of economic data due on Friday including fourth-quarter GDP, December industrial output, retail sales and house prices. Oil prices, which are under pressure from the prospects of weaker demand in 2013, gained support from concerns about supplies being affected by military activity in Algeria and Mali. Islamist fighters seized dozens of Western and Algerian hostages in a dawn raid on a natural gas facility deep in the Sahara on Wednesday and demanded France halt a new offensive against rebels in neighboring Mali. Brent added 0.3 percent to $110.05 a barrel, and U.S. oil was up 10 cents to $94.14.

Source