GLOBAL MARKETS-Shares, euro rattled but sterling drives higher

Mon Dec 2, 2013 7:52am EST

* Euro, shares dip after mixed European data
    * Sterling at trade-weighted five-year high
    * HSBC final PMI suggests China manufacturing stable
    * Thai stocks, baht skid as protests continue
    * Wall Street seen opening flat

    By Marc Jones
    LONDON, Dec 2 (Reuters) - Evidence that Britain's economy is
accelerating away from its European neighbours drove sterling to
a five-year high on Monday, as signs of backsliding in France
and Spain spooked euro zone stocks.
    This week may end up being the final one of the year that
excites investors, with half a dozen top central banks holding
meetings and a barrage of major global economic data on tap
culminating with U.S. jobs data on Friday. 
    A decent reading on Chinese manufacturing had got markets
off to a largely smooth start in Asia before some mixed signals
from Europe's big economies turned things more lively.
    Sterling surged to a five-year high after data showed
UK manufacturing grew at its strongest rate in almost three
years, adding to recent talk that the Bank of England may not be
able to hold off from raising interest rates next year.
    At the same, euro zone stocks were sent stumbling by
disappointing equivalent figures from France and Spain that
underscored the ongoing split in fortunes between them and euro
zone powerhouse Germany. 
    "You have seen the PMIs and some are better than others, but
what is does seem to point to is a diverging European economy,
and that is a bit of a worry," said Michael Hewson, senior
markets analyst at CMC Markets in London.
    "There is a lot of U.S. data this week and we are also in
the last month of the year. Investors are going to be reluctant
to take on new risk."    
    Britain's FTSE 100 was down 0.6 percent ahead of
U.S. trading amid the talk of higher rates, while in the euro
zone, Milan and Madrid suffered from growth
worries as they tumbled 1.3 and 0.9 percent respectively.
    Debt and currency markets told a similar story. 
    Bonds from core euro zone countries Germany and the
Netherlands to those in France, Italy and Spain all lost ground
as did the euro as it hit an 11-month low vs the pound.
  
    The European Central Bank also meets on Thursday, but having
surprised markets by cutting rates last month the bank is
expected to sit on its hands this meeting.
         
    CHINA REASSURES, THAILAND FIGHTS
    Futures prices pointed to a flat start for Wall Street after
last week's Thanksgiving festivities.  
    It was a nervy start to the week on a number of fronts and
investors had plenty of excuses to put a lid on world stock
markets and halt 8 straight weeks of gains on Wall Street.
    Thanksgiving sales were seen as disappointing, but it was
geopolitics that grabbed the focus after upheavals in Ukraine
and Thailand escalated over the weekend and tensions continued
between China and Japan over disputed South China sea islands.
    China's factory activity was more encouraging. It kept up
steady growth in November boosted by new orders, though the pace
of expansion eased from October, the HSBC/Markit Purchasing
Managers' Index (PMI) showed. 
    That followed an official survey released over the weekend
showing factory growth held at an 18-month. 
    "The data broadly says that things are stabilising in
China," said Thomas Lam, chief economist at DMG & Partners
Securities in Singapore.
    The Australian and New Zealand dollars rose sharply
following the data highlighting the link to China's fortunes.  
    In Thailand though, the baht hit a three-month low
and the SET index tumbled more than 1 percent as
anti-government protesters renewed their fight to topple Prime
Minister Yingluck Shinawatra, prompting riot police to fire
teargas and stun grenades for a second day.    
   
 
    PAYROLLS IN FOCUS
    After a soft run in Asia, the dollar rebounded in Europe to
sit at $1.3545 to the euro which was the day's main loser, and
to 102.77 against the Japanese yen.
    U.S. ISM manufacturing PMI and employment figures will be
closely scrutinised later and data later in the week also remain
a key focus with the Federal Reserve poised to reduce its
stimulus as soon as it deems the economy strong enough.     
    Non-farm payrolls for November, due on Friday, will be the
most important. Economists expect an increase of 185,000 jobs
last month, down from 204,000 in October, according to a Reuters
survey of economists.
    In commodities trading, gold  was down about 1
percent at $1,238 an ounce, undermined by concern a stronger
U.S. economy will lead the Fed to reduce its stimulus. Gold has
lost around a quarter of its value so far this year, on course
for its first annual loss in 13 years.
    Copper shed about 0.5 percent to $7,016 a tonne and
Brent crude oil dipped below $110 a barrel as traders
weighed supply outages in Libya against U.S. inventory levels.
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