(Repeats to widen distribution)
* Vodafone, Vivendi boost European stocks
* Q2 U.S. economic growth data expected
* Bond yields up from lows after ECB holds off rate cuts
* ECB widely seen easing policy in Sept
* Graphic: World FX rates in 2019 http://tmsnrt.rs/2egbfVh
By Tom Arnold
LONDON, July 26 (Reuters) – European stocks staged a tentative recovery on Friday as a rally in media stocks and solid earnings at several U.S. companies helped investors overcome the disappointment of the European Central Bank’s failure to deliver immediate policy easing.
A day after its worst session in three weeks, the pan-European stock benchmark index added 0.4%.
London’s FTSE 100 also revived, helped by Vodafone’s plans to create a separate European tower company and education firm Pearson’s gains from an upbeat trading update.
Decent U.S. earnings overnight from Google’s owner Alphabet , Intel and Starbucks helped offset worries from weaker Amazon numbers.
U.S. stock futures rose 0.3%, pointing to a turnaround after Wall Street shares fell from record highs on Thursday.
“A stream of earnings from the United States has shown people have to pay attention to the corporate cycle as well as the interest rate cycle, and focus is also shifting to the U.S.’s latest GDP numbers this afternoon, which may go some way to influencing what the Federal Reserve decides to do,” said Andrew Milligan, head of global strategy at Aberdeen Standard Investments.
ECB President Mario Draghi on Thursday all but pledged to ease policy further and even hinted at a reinterpretation of the ECB’s inflation target. But many investors had hoped for an immediate reduction of interest rates.
Helping to offset the disappointment, shares of Vivendi rose 5.7% after stellar first-half results at its Universal Music Group raised the stakes for the sale of the French media giant’s most-prized asset.
That helped Europe’s media sector advance 1.6%. Vodafone jumped 9.8% on plans to move its mobile mast operations in 10 European markets into a new company that it potentially could list.
In Asia, uncertainties over whether Washington and Beijing will be able to settle gaping differences over trade, technology and even geopolitical ambitions, kept many investors on guard. Negotiators from the two countries will meet in Shanghai next week. MSCI’s broadest index of Asia-Pacific shares outside Japan dropped 0.6%.
A rally in global bonds ran out of steam after Draghi cautioned about pulling the trigger too quickly on policy easing.
Still, the euro’s overnight index swaps are pricing in a rate cut of more than 10 basis points in September, to minus 0.50 percent.
“An interest rate cut of 10 basis points in September looks like a done deal now,” said Hideki Kishida, fixed income strategist at Nomura Securities.
Euro zone government bond yields began to reverse some of the rises seen after the ECB meeting.
German 10-year bond yields were around one basis points lower at -0.373%, heading back down towards the record low of -0.422%, recorded on Thursday. Other 10-year yields in the euro zone were also around two basis points lower , .
Investors expect the Federal Reserve to cut interest rates by 0.25 percentage point at its policy meeting ending on July 31 to protect the economy from potential damage from the U.S.-China trade war.
An advance reading of U.S. gross domestic product, due at 8:30 a.m (1230 GMT), is expected to show the economy grew 1.8% in April-June, the slowest growth in more than two years.
The dollar held near two-month highs and is set for its second consecutive weekly rise as investors waited for the GDP numbers.
The euro traded at $1.1136, a mild recovery from a two-month low of $1.1102 hit after the ECB decision on Thursday but down 0.1% on the day. For the week, the single currency is down 0.7%.
Sterling edged down to $1.2428, and was on course for a 0.6% weekly loss. Cable has stabilised since Boris Johnson became Britain’s new prime minister, but uncertainty remains about Britain’s negotiations to leave the European Union. (Reporting by Tom Arnold; Additional reporting by Hideyuki Sano in Tokyo Editing by Larry King and Andrew Cawthorne)