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 The Purchasing Managers' Index data nevertheless showed China's vast
manufacturing sector contracted again in September, suggesting the
world's second-largest economy is still cooling more rapidly than
expected a few months ago.
Relief the figures were not worse sparked 0.5-0.7 percent gains for
Chinese stocks ahead of a week-long holiday, though it was a near 2
percent jump for the Nikkei in Tokyo that set the pace as the whole
of Asia made gains.
There were rises too of 1.3 to 1.6 percent on Britain's FTSE,
Germany's DAX and France's CAC in early European trading as
the global rally, which had begun on Wednesday, kept rolling.
"The clouds are clearing a bit. Overall China is clearly slowing but
what does give me comfort is that its policy dashboard has a lot
more buttons to press on it than ours in Europe," said Neil
Williams, chief economist at fund manager Hermes in London.
"I'm now expecting China to cut quite aggressively its interest
rates and reserve requirements, and even move towards a fiscal
splurge."
Europe's share gains came despite a weakening of euro zone
manufacturing growth, a slowing of new orders and price-cutting that
underscored the region's sluggishness.
The PMIs, published a day after official data showed euro zone
inflation slipped below zero again in September, are likely to add
to pressure on the European Central Bank to expand its already more
than 1 trillion euro stimulus program.
In currency markets, the dollar <.DXY> firmed slightly as the
brighter market mood added to a sense that the Federal Reserve is
still considering its first rise in interest rates in more than a
decade later this year.
That and the soft euro zone figures squeezed the euro back down to
1.1146 <EUR=>. The Australian dollar, used as a proxy for
China-related trades, had earlier risen 0.5 percent to $0.7058 <AUD=D4>
following the China PMIs.
"The Chinese data was just slightly better and this is lending some
confidence to investors," said Neil Mellor, currency strategist at
Bank of New York Mellon. "Having said that, euro/dollar is still
stuck within familiar ranges."
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EMERGING RELIEF
Commodities markets also bounced amid the lull in global risk
aversion, with copper and nickel rallying as bearish investors
closed out quarter-end positions and ahead of the Chinese holidays.
Industrial metals were also boosted as shares in hard-hit commodity
group Glencore continued to rebound following upbeat broker notes on
the firm from its bankers Citigroup and also Barclays.
Three-month copper on the London Metal Exchange was up 1.2 percent
at $5,223.50 a tonne after hitting two-week highs. Nickel
hovered near a four-week high of $10,465.00 a tonne as traditional
safe haven gold slid to a two-week low.
Oil also headed higher. U.S. crude was up 1.5 percent at $45.70 a
barrel despite data showing a surge in U.S. crude oil and gasoline
stocks last week. Brent crude rose 0.9 percent to $48.83 a barrel.
Europe's benchmark bond markets were largely steady as most
investors waited for closely watched U.S. jobs data on Friday likely
to influence bets on Fed rate hikes.
Emerging market stocks and currencies enjoyed the respite. MSCI's
benchmark global EM index climbed 0.8 percent as the hard hit
Brazilian real, Malaysian ringgit Turkish lira and Chilean
peso also all held their ground.
(Additional reporting by Anirban Nag; Editing by Catherine Evans)
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