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 The Chinese purchasing managers index intensified fears that a
slowdown in the world's second-largest economy will spread more
widely, hitting Asian markets, but those fears were later allayed by
the European PMIs.
A recovery in the shares of scandal-hit Volkswagen, which had lost
more than a third of their value in the first two days of this week,
also spurred the recovery in European shares.
S&P mini futures pointed to a higher open on Wall Street.
"Headwinds from the emerging market turmoil are not derailing the
euro zone recovery," said Marco Valli, chief euro zone economist at
Unicredit.
"While weakness in world trade is unlikely to be reversed soon – the
latest news from China points to a further loss of momentum there –
the euro zone continues to benefit from past euro depreciation and
the recovery in domestic demand," he said.
At midday in Europe the FTSEuroFirst index of leading 300 European
shares was up 0.6 percent at 1,373 points, Germany's DAX and
France's CAC 40 were up 0.7 percent, and Britain's FTSE 100 was up
1.4 percent.
Volkswagen AG was in the spotlight again after the company said a
scandal over falsified U.S. vehicle emission tests could affect 11
million of its cars around the globe as investigations of its diesel
models multiplied, heaping fresh pressure on CEO Martin Winterkorn.
The share price fell as much as 8 percent early on Wednesday before
rebounding to trade 3 percent higher. It plunged 37 percent over
Monday and Tuesday.
Asian stocks, however, posted their biggest single-day fall in a
month, with MSCI's broadest index of Asia-Pacific shares outside
Japan down 2.3 percent, its biggest daily loss since Aug. 24,
according to Thomson Reuters data.
The MSCI world index was down 0.1 percent, marking the fourth
consecutive daily loss.
VW SCANDAL SINKS PLATINUM
The preliminary Caixin/Markit China Manufacturing Purchasing
Managers' Index (PMI) fell to its worst level since March 2009.
"The decline was driven by a fall in new orders and new export
orders. Falling demand both domestically and abroad is only going to
make the task of achieving 7 percent growth that much harder," said
Craig Erlam, senior market analyst at Oanda in London.
The Chinese data came after the U.S. central bank refrained from
lifting interest rates for the first time in nearly a decade last
week, citing concerns that global problems, and China in particular,
may hurt the U.S. recovery.
However, the resilience of European stocks cooled overnight demand
for safe-haven fixed-income assets.
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The benchmark two-year U.S. Treasury yield edged up to 0.7 percent,
and the yield on the 10-year U.S. bond rose 3 basis points to 2.16
percent.
Yields on benchmark German bonds also rose as much as 3 basis
points.
The positive reaction in Europe to the PMIs helped the euro to rise
a third of one percent to $1.1160. The dollar was little changed
against the yen at 120.20 yen.
In emerging markets, Brazil's real languished at a record low
against the dollar, having fallen through the 4 per dollar level on
Tuesday for the first time ever.. It has now lost around 35 percent
this year.
In commodities U.S. crude futures rose 0.7 percent to $46.70 per
barrel, while Brent futures rose 0.5 percent firmer to $49.35.
Copper recovered in European trading from near four-week lows
overnight in Asia. It was last up 0.5 percent having earlier posted
its biggest one-day drop in more than two months as fund and
speculative selling pushed prices down following the Chinese PMI
report.
Platinum slid to a fresh 6-1/2-year low on fears about reduced
demand from the auto sector, where it is used in diesel catalysts to
clean up exhaust emissions.
It fell to its lowest since January 2009 at $925.30 an ounce, before
recouping some losses to trade up 0.3 percent at $937.20.
The metal has been hurt by news of Volkswagen's falsification of
U.S. vehicle emission tests as investors believed it could affect
demand for diesel cars.
(Reporting by Jamie McGeever; Editing by Toby Chopra; To read
Reuters Global Investing Blog click on http://blogs.reuters.com/globalinvesting;
for the MacroScope Blog click on http://blogs.reuters.com/macroscope;
for Hedge Fund Blog Hub click on http://blogs.reuters.com/hedgehub)
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