By Marc Jones
LONDON (Reuters) - World stocks and bonds had a second day of strong gains on Wednesday, as healthy U.S. data, moves by China to calm bank fears and supportive signs from Europe's central banks extended the rebound from last week's global sell-off.
All combined to soothe nerves about plans for a reduction in U.S. stimulus and recent China credit crunch worries, and left futures pointing to opening gains of 0.5 percent on Wall Street after a day of sustained buying in European and Asian markets.
Gold and silver, however, both slumped to near three-year lows as investors continued to dump assets which they have used as a safety net in recent years in case central bank money printing fuelled inflation or backfired altogether.
There was a slight drop back in equity markets after U.S. growth was revised lower. Nevertheless, European shares were still up 1.4 percent ahead of the U.S. restart and on course for their biggest two-day gain since April.
Bond markets in Europe and benchmark U.S. Treasuries also continued to claw back ground although investors remained wary the rebound could give way with markets likely to need more time to acclimatise to new environment.
"At this point in time, having seen a incredibly violent sell-off in the Treasury markets that took everything with it, there is a certain amount of settling back going on," said Kit Juckes, a market strategist at Societe Generale in London.
"I'm not sure we are done with position adjustment yet though. We are not even done with month-end (adjustments) properly, so I wouldn't declare this as anything more than things are looking a little bit quieter."
Precious metals were not looking quieter, however. Gold fell over 2 percent to $1,230 an ounce and silver dropped 4 percent to leave both at their lowest levels since September 2010 and gold facing its biggest quarterly drop on record.
After almost nine years of near unbroken gains, signs that the worst of the global financial turmoil may be over and that central banks might begin reducing stimulus, has sparked a major shift in investor attitude towards bullion.
Data on Tuesday showed U.S. consumer confidence jumped in June to its highest level in more than five years, supporting the view that the Fed will press ahead with plans to reduce its $85 billion a month support programme later this year.
"It seems as though the momentum is increasing in the sell-off (in gold)," said Viktor Nossek, head of research at Boost ETP, an exchange traded products provider.
"The case for safe havens assets simply isn't there" he added. "The stock market has recovered, indicating people see further stability ahead especially after the signals from the Chinese authorities that they won't allow a complete meltdown in the money markets."
Markets since Fed tapering hint: http://link.reuters.com/wej98t
Asset returns in 2013: http://link.reuters.com/dub25t
Currencies v dollar in 2013 http://link.reuters.com/tak27s
The Fed's shift last week has triggered heavy volatility across asset classes, raising concerns that it could snuff out still-delicate economic recoveries in many parts of the world.
As new data showed Europe's economy remains in the doldrums, the region's policymakers were again out in force.
ECB head Mario Draghi reiterated that it remained ready to cut rates again if needed, adding that he and his colleagues would look "with great attention to the potential volatility consequences.
Bank for International Settlements General Manager Jaime Caruana also backtracked on a report published at the weekend, telling Reuters the BIS was not in fact calling for immediate moves to withdraw global stimulus.
Draghi's "dovish" comments helped pushed the euro to a three-week low of $1.3035 against a broadly stronger dollar <.DXY> and helped trim yields on the bonds of peripheral euro zone economies which have jumped by more than half a percent over recent weeks.
Elsewhere in the currency market, there was little reaction by the Australia dollar after the country's government ousted its leader ahead of upcoming elections [ID:nL5N0F22A1]
As the plunges in gold and silver grabbed most of the attention in the commodities market, oil also remained under pressure at just over $101 a barrel and growth-attuned copper fell 1.6 near a three-year low.
"The market is still concerned about the Chinese growth outlook," said economist Alexandra Knight at National Australia Bank in Melbourne in reference to the slide in copper.
(Additional reporting by Richard Hubbard; Editing by Jeremy Gaunt and Toby Chopra)