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Euro, pound, Swiss franc all rise against the dollar

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European stocks climb to fresh record high

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GDP data shows UK avoids recession

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Oil close to lowest level of the year so far

By Marc Jones

LONDON, Feb 13 (Reuters) - Europe's main stock markets

and currencies rallied on Thursday on growing optimism about a

peace deal between Ukraine and Russia, and as bond buyers

overcame their latest wobble after stubbornly high U.S.

inflation data.

Persisting trade war concerns kept gold in demand after U.S.

President Donald Trump reiterated his plans to impose reciprocal

tariffs on every country that has duties on U.S. goods.

The euro's bounce left it up 0.3% at $1.041,

helped by Trump's phone calls with Russian President Vladimir

Putin and Ukraine's Volodymyr Zelenskiy on Wednesday, which

raised hopes of an end to the near three-year-long war.

Oil prices fell for a second day, testing some key support

levels, while Europe's record-high STOXX 600 added to

its 8% surge this year, although Wall Street's S&P 500

and Nasdaq futures were back in the red.

ING currency strategist Chris Turner said a peace deal in

Ukraine could be an "important positive" for European countries

if it delivered lower energy prices and led to a Marshall

Plan-style rebuilding of Ukraine.

"The rally may have a little further to run," he added,

although the stiff headwinds of potential U.S. tariffs on Europe

and high U.S. rates "will limit the EUR/USD upside".

As well as a higher euro, the Swiss franc was up

against the dollar and Britain's pound rose 0.3% as it

was also helped by data showing an unexpected modest pick-up in

the British economy at the end of last year.

Overnight in Asia, Japan's Nikkei had gained 1.3%

thanks to a much weaker yen. MSCI's broadest index of

Asia-Pacific shares outside Japan rose as much

as 1.2% to hit its highest since early December.

Chinese blue chips saw a late dip to end their day

down 0.2%, as did Hong Kong's Hang Seng index after it

had hit another four-month high.

The bond markets were still digesting Wednesday's

January U.S. consumer price data that posted the biggest rise in

nearly 1-1/2 years. The closely watched core inflation index,

which excludes food and energy prices, rose 0.4% in the month,

above forecasts for 0.3%.

With the Federal Reserve already signalling no rush to cut

rates further, investors scaled back expectations of more policy

easing from the Federal Reserve this year to just 28 basis

points, equivalent to just one cut.

Benchmark Treasury yields - which tend to drive global

borrowing costs - had jumped to a three-week top of 4.66%

. But they were receding again on Thursday, drooping

back to 4.61% while Germany's 10-year Bund yield was

flat at 2.475%, having jumped 12 basis points over the previous

two sessions.

Germany's ECB rate setter Joachim Nagel had reiterated on

Wednesday that it needed to take rate cuts gradually.

Analysts at Barclays, meanwhile, expect only one rate cut at

most from the Fed this year.

"Risks are now skewing toward the Fed delivering no cuts

this year, and we are putting somewhat more weight on

off-baseline scenarios where rate hikes enter the conversation,"

they said in a note to clients.

'JEALOUSY AND RAGE'

Ukraine's government bonds continued to climb on the peace

talk hopes, although there was angst among top European

politicians that a deal was being forced on Kyiv and could

encourage more Russian aggression in future.

"Frigid spinster Europe is mad with jealousy and rage,"

Dmitry Medvedev, a former Russian president, wrote on Telegram.

He said Europe had not been warned of the Putin-Trump call or

consulted about its content.

"It shows its real role in the world," he said. "Europe's

time is over."

Back in FX markets, the dollar was 0.2% weaker

at 154.15 yen, having jumped 1.3% on Wednesday. The yen was

licking its wounds at 153.95 yen per dollar, although it

remained up about 2% for the year so far.

Among the main commodities, oil prices extended their recent

fall as the hopes for a Russia and Ukraine peace deal bolstered

the possibility of an easing of Russian oil sanctions that have

disrupted supply flows.

U.S. crude fell 1% to $70.64 a barrel, after dropping

2.7% overnight, and Brent was also 1% lower at $74.43,

having dropped 2.4% overnight.

Gold rose 0.5% to $2,918 per ounce, not far from its

record high of $2,942.70 hit on Tuesday.