PMI lifts shares, commodities, euro soft ahead of ECB
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[June 02, 2014] By
LONDON, (Reuters) -
Reassuring Chinese factory data and another record high
for Wall Street lifted world stocks and commodities on
Monday, as markets waited to see how far the European
Central Bank will go with policy easing plans this week.
China's manufacturing activity expanded at the fastest pace in five
months in May, data showed on Sunday, reinforcing views that the
world's second-largest economy is regaining momentum after a wobble
at the start of year.
Basic resources stocks .SXPP including miners and other commodity
companies were the biggest gainers as the main bourses in London
.FTSE and Frankfurt .GDAXI started what is set to be a busy week for
markets on a positive note. .EU
After weeks of speculation about interest rate cuts and additional
unconventional policy easing measures, the ECB meets on Thursday
with expectations running extremely high.
The euro fell 0.15 percent to $1.3610 EUR=, not far from a
three-month low of $1.3586 touched on Thursday. It also fell against
the pound EURGBP=D4 to 81.25 pence, with diverging monetary policy
outlooks between the ECB and the Bank of England, which also meets
this week, underpinning the British currency.
Ahead of the ECB meeting, German inflation data for May due at
around 1200 GMT will be closely watched. The ECB is increasingly
concerned that extremely low inflation could be becoming entrenched
in the euro zone. <ECONALLDE
Like many banks, Societe Generale expects the ECB to cut rates on
Thursday and start charging banks that deposit cash with it. But its
economists also expect a far more aggressive 300 billion euro ($409
billion) Aset Backed Securities (ABS) purchase programme to be
"We are expecting quite a slew of measures from the ECB," said Alvin
Tan, an FX strategist at Societe Generale in London.
"In our view all the rate cuts are priced in, even a negative
deposit rate, but an asset purchase programme is probably not, so
that would weaken the euro."
In Asia, the positive sentiment spilling from China had helped
Tokyo's Nikkei .N225 jump 2.1 percent, while Australian shares .AXJO
added 0.3 percent.
MSCI's broadest index of Asia-Pacific shares outside Japan
.MIAPJ0000PUS was little changed. Greater China markets were closed
on Monday for a holiday.
"Risk appetite has risen mainly on bright economic data from China,
but the direction for the month will likely depend on other economic
data like U.S. jobs figures this week," said Hikaru Sato, a senior
technical analyst at Daiwa Securities in Tokyo.
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The dollar was broadly stronger. It edged up 0.2 percent to 102.03
yen JPY= thanks in part to slightly higher U.S. Treasury yields and
as it rode momentum from Friday's record close for S&P 500. .N
Investors will be looking to this week's non-farm payrolls jobs and
wage data for confirmation that recovery for the world's largest
economy is on track.
The good China PMI reading also lifted oil and base metals by
improving demand prospects for the world's second biggest economy.
Brent crude LCOc1 gained 40 cents to $109.81 a barrel. O/R
Three-month copper on the London Metal Exchange CMCU3 climbed 0.6
percent to $6,888 a tonne. The metal gained 3.1 percent in May, its
biggest monthly advance since December. MET/L
Safe-haven gold slid for a fifth straight session. Spot gold XAU=
was at $1,245.10 an ounce, not far from the four-month low of
$1,241.99 hit on Friday. GOL/
"It's certainly a good sign to see the PMI starting to pick up,
which suggests that the Chinese fine-tuning of policies is starting
to gain a bit of traction which is a positive for industrial
commodities," said analyst James Glenn of National Australia bank.
(Additional reporting by Shinichi Saoshiro in Tokyo)
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