Risk appetite has perked up on global markets thanks to optimism that U.S. Democrats and Republicans are nearing a deal to raise the debt ceiling and avoid an economically catastrophic default.

European and Asian shares rose on Thursday, the dollar held near a seven-week peak against a basket of major currencies and Wall Street stock futures are hinting at a steady open after the S&P 500 index gained about 1.2% on Wednesday.

But while a debt ceiling reprieve could boost markets in coming days, the backdrop of a lacklustre global economy is unchanged, with its twin engines, China and the United States, sputtering.

A dose of growth from China would help long-term risk appetite, but predictions of the world's second largest economy leaping out of the straitjacket of COVID-19 restrictions are proving wide of the mark.

The Chinese renminbi has crossed 7 per dollar, down 1.4% this year, following underwhelming industrial production and retail sales reports and slowing home price gains, all despite property stimulus policies and the release of pent-up demand.

Citi's China economic surprise index is at its lowest since January, a further sign that the growth outlook has weakened.

U.S. corporate earnings meanwhile are painting a grim picture of consumer caution as the lagged effect of interest rate hikes meets above-target inflation.

Big box retailer Target on Wednesday signaled a bleak second quarter as customers steer away from spending on non-essential electronics and home goods because of high prices, a day after Home Depot cut annual sales estimates.

Walmart, which may be on a stronger footing because of its focus on low-price basics, posts its own update later in the day.

The S&P 500 is trading at a rich 18 times forecast earnings, buoyed by the tech mega-stocks that dominate the index. Apple's market capitalization exceeds that of the small-cap Russell 2000 index, and the tech-heavy Nasdaq 100 is up 24% this year.

Tech has boomed on predictions the U.S. Federal Reserve will start cutting rates from July, increasing appetite for rate-sensitive growth companies whose valuations are flattered when money gets cheaper. Further out-performance depends on markets being right about the Fed's willingness to notch interest rates lower from July.

A plethora of Fed speakers argued this week, however, for keeping monetary policy tight while inflation remains high.

Developments that could affect markets on Thursday:

* Economic events: U.S. initial jobless claims, U.S. existing home sales, Philly Fed business index.

* Central bank speakers: Fed governor Philip Jefferson, Fed vice chair for supervision Michael Barr.

* Earnings: Walmart, Alibaba, Applied Materials.

(Reporting by Naomi Rovnick; Editing by Emelia Sithole-Matarise)