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 Investors were cheered by strong results from German luxury carmaker
BMW and France's third biggest listed bank Credit Agricole, among
others, enabling European equities to buck the trend in Asian
markets which were hit by weak Chinese data.
But the gains appeared fragile ahead of a U.S. survey that could
cast fresh light on the pace of recovery in the world's biggest
economy.
The pan-European FTSEurofirst 300 index of blue-chips was up
0.5 percent at 1,333.78, a small recovery from its near 4 percent
fall over the past two weeks.
The index has been pummelled by concerns about a tightening of U.S.
monetary policy, financial trouble at BES and political tensions,
notably in Ukraine and Gaza.
With all these concerns still present in the market, traders said
the downtrend may resume shortly.
"Nothing has materially changed since last week," Jonathan Sudaria,
a dealer at Capital Spreads, said. "The down-move may have stalled
and some markets have had a modest uptick, but traders are already
framing this as a textbook dead cat bounce."
Asian shares fell after the China services purchasing managers'
index (PMI) compiled by HSBC/Markit fell to 50.0 in July from a
15-month high of 53.1 in June.
It was the lowest reading since November 2005 when the data
collection began, indicating a recovery in the broader economy is
still fragile and may need further government support.
EURO WOES
The euro fell to $1.3395 after subdued services PMI data from the
euro zone, with initial declines sparked by the reading from Italy's
Markit/ADACI Business activity index. The print eased to 52.8 in
July from 53.9 in June. Economists in a Reuters poll had expected
54.0.
The broad euro zone PMI figure of 54.2 came in slightly below
expectations.
"It (the euro) certainly has reacted negatively to the Italian
numbers," said Neil Mellor, a currency strategist with Bank of New
York Mellon in London.
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"On the main numbers even 54 is not exactly a figure that sets the
world alight. It returns us to what we've been seeing for a few
weeks now - that the momentum in Europe is faltering."
Focus was now on the corresponding U.S. survey due later in the day
and expected to show a robust reading.
The dollar held below a 10-1/2-month peak against a basket of
currencies and was little changed at 102.495 yen , well below the
four-month peak of 103.15 hit last week.
The greenback was capped by a fall in Treasury yields overnight
after weaker-than-expected U.S. non-farm payrolls data on Friday
knocked it off the 103 threshold.
Treasury yields fell as the bond market retained its bullish tone
after rallying Friday on the jobs report.
In commodities, Brent held steady above $105 a barrel despite ample
supplies, underpinned by political tension in the Middle East and
North Africa and expectations that data will show a further draw on
U.S. crude inventories last week.
Brent crude rose for the second straight session, climbing 14 cents
to $105.55 after gaining 57 cents on Monday.
(Additional reporting by Francesco Canepa and Patrick Graham,
editing by John Stonestreet)
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