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 The rally belied a string of poor economic data from Beijing to
Tokyo as demand for safe-haven assets waned, yet investors remained
on edge as concerns lingered about global growth and the health of
the financial sector.
European stocks rose 3 percent <.FTEU3>, having shed nearly 10
percent over the last fortnight, following a similar bounce in Asia.
Futures pointed to notional gains of more than 1 percent on Wall
Street <ESc1> but U.S. markets will be closed for a holiday.
Meanwhile, assets that tend to perform well in times of stress
lagged. The Japanese yen lost ground against the U.S. dollar while
top-rated German bond yields pulled away from nine-month lows hit
last week. <GVD/EUR>
"We had a very strong statement from the Chinese authorities
signaling they are committed to a stable currency and that's helped
sentiment ... safe-haven flows have unwound somewhat," said RIA
Capital Markets strategist Nick Stamenkovic.
 In China, spot yuan jumped more than 1 percent to 6.4934 per dollar
- its firmest this year - after the People's Bank of China set its
daily midpoint 0.3 percent stronger and the head of the bank was
quoted as saying speculators should not be allowed to dominate
market sentiment. [CNY/]
A stronger yuan reduces the risk that China will export deflation to
the world, while worries about consumer price growth have also been
helped by a surge in the oil price late last week.
Brent <LCOc1> and U.S. crude futures <CLc1> edged lower on Monday
but held on to most of a 10 percent surge from Friday that came amid
renewed talk that the Organization of the Petroleum Exporting
Countries (OPEC) might finally agree to cut output to reduce a world
glut. [O/R]
DISCONNECT
China's weak exports and imports in January, down 11.2 percent and
18.8 percent year-on-year respectively, seemed not to disturb
markets. The resulting jump in the country's trade surplus to $63
billion for the month might have helped, as that may offer support
to the yuan.
The disconnect between markets and economics was perhaps starkest in
Japan, where the Nikkei <.N225> jumped more than 7 percent, putting
its worst week since the depths of the global financial crisis in
2008 quickly behind it.
This came despite data showing the economy contracted by an
annualized 1.4 percent in the last three months of 2015, more than
expected.
MSCI's broadest index of Asia-Pacific shares outside Japan rose 2.3
percent <.MIAPJ0000PUS>, after losing 10 percent of its value so far
this year.
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European shares followed in their wake, led by a 3 percent rebound
in banking stocks <.SX7P> on news that the European Central Bank
(ECB) is in talks to buy bundles of Italian bad bank loans as part
of its asset-purchase program. [.EU]
Some strategists said Monday's bounce may yet prove to be
short-lived, with lower oil prices, capital outflows and economic
weakness in China, and pressure on European banks, creating a
dangerous cocktail for investors.
"It's no surprise to see markets rebounding after the excessive
movements seen over the last few weeks" said Riccardo Ambrosetti,
chairman of Italy's Ambrosetti Asset Management.
Indeed, the strong yuan fixing by the People's Bank of China (PBOC)
on Monday was seen by some traders as a move to deflect speculation
about a possible devaluation that has been one of the main factors
roiling global markets.
PBoC Governor Zhou Xiaochuan said there was no basis for the yuan to
keep falling in a weekend interview, and China would keep it stable
versus a basket of currencies while allowing greater volatility
against the U.S. dollar.
Against a basket of currencies <.DXY>, the dollar was up a shade at
96.363 having been at its lowest in almost four months. Likewise, it
edged up to 113.75 yen <JPY=>, having touched a 15-month trough just
under 111.00 last week.
The euro was last down 0.6 percent at $1.1194 <EUR=>, having slipped
from a 3-1/2 month peak of $1.1377.
Gold <XAU=> eased to $1,210.50 an ounce, after enjoying its best
week in four years as investors fled riskier assets.
(Additional reporting by Marius Zaharia in London, Danilo Masoni in
Milan and Saikat Chatterjee in Hong Kong; Editing by Hugh Lawson)
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