GLOBAL MARKETS- European slowdown supports stimulus hopes; shares, euro rise
* European shares gain ground on stimulus hopes * Euro gains 0.15 pct vs dlr but seen vulnerable to sell-off * U.S. stocks poised to open higher with retail sales key By Marc Jones LONDON, Aug 14 (Reuters) - European shares and the single currency rose on Tuesday after data showing that the euro zone's debt-ravaged economy shrank in the second quarter encouraged talk of central bank action. The 17-nation currency bloc contracted by 0.2 percent in the quarter, although regional powerhouse Germany eked out growth of 0.3 percent. But even there a forward-looking sentiment indicator pointed to a poorer performance ahead. "Germany is not managing to decouple itself from the rest of the euro zone," said Bernd Hartmann, head of investment research at VP Bank. "That means the last pillar of European growth is gradually buckling." The euro zone data followed worrying China trade figures on Friday and Monday's report showing a slowdown in Japan. Both lent support to the view that central banks will be forced to act as early as next month to boost flagging global growth. Top European shares, which took their biggest tumble in a week on Monday, were up 0.4 percent by late morning. Indexes in London, Paris and Frankfurt were all higher, helping lift the global MSCI index by 0.2 percent to 323.11 points. U.S. stock index futures also pointed to a higher open on Wall Street, with futures for the S&P 500, the Dow Jones and the Nasdaq 100 rising by around 0.2 percent. The euro was up 0.15 percent at $1.2352. It gained when German growth slightly beat expectations but eased back after the influential ZEW investor sentiment survey indicated Europe's largest economy could begin shrinking in the third quarter. "The risks for Q3 remain to the downside, and the overall picture for the euro zone remains bleak," said Aline Schuiling, senior economist at ABN Amro. The euro's bounce saw the dollar index dip to 82.351, retreating from a one-week high of 82.870 set on Friday. Prices of German government bonds, traditionally favoured by risk-averse investors, dipped after the data, sending 10-year yields 2.8 basis points higher at 1.43 percent., But the market benchmark is staying within a 1.126 to 1.6 percent range seen since early July as investors await details from the European Central Bank on how it plans to intervene to contain funding pressures on Spain and Italy. CENTRAL HOPES Global markets have been rallying on a view that new plans being drawn up by the ECB to combat the euro zone debt crisis will bring some stability to the troubled bloc, and that other major central banks would soon address faltering global growth with fresh stimulus measures. The scale of the euro zone's troubles were highlighted by data showing that Spanish banks' reliance on ECB funding aid hit an all-time high of 402 billion euros in July, and a warning from the Bundesbank that Germany's economy was likely to deteriorate in the second half of the year. Oil prices meanwhile kept edging higher as the weak European economic data was at least slightly less gloomy than anticipated, and ahead of a U.S. report expected to show a drop in oil stocks. Brent crude rose 34 cents to $113.94 a barrel to be near the highest level since early May, while U.S. crude firmed by 38 cents to $93.11 a barrel. Gold tracked the climb, rising 0.1 percent to $1,611.80 an ounce with investors staying cautious while they wait to hear more from the central banks about plans to stimulate growth.
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