* European shares helped by PMI data
* Emerging markets steady for a second day
* Yen, bonds, gold higher as investors stick to safety
* Euro held back before ECB meets
By Marc Jones
LONDON, Feb 5 European shares clung to slender
gains on Wednesday as disappointing Christmas retail sales took
the gloss off the best euro zone PMI figures in 2-1/2 years and
calmer conditions in emerging markets.
Overnight trading in Asia had been mixed despite a rebound
on Wall Street, and European nerves were beginning to wobble
again as a sharp drop in December shop sales added to caution
before the European Central Bank's monthly meeting on Thursday.
The euro inched lower and the FTSEurofirst 300 share
index was up just 0.2 percent. It had earlier climbed
0.4 percent after Markit's euro zone Composite PMI, which gauges
business activity across thousands of companies, brightened the
The survey showed the 18-member bloc's recovery becoming
increasingly broad-based, with Germany leading an upswing in
peripheral members and signs of a stabilisation in number two
Retail data shortly afterwards disappointed, however, with a
1 percent fall in December sales compared with a year before
highlighting the pressure still on consumers.
"Technically, the market is clearly 'oversold', and
investors should be rushing in," said Jeanne Asseraf-Bitton,
head of global cross-asset research at Lyxor Asset Management.
"But the problem is the global economic recovery that
everyone was betting on just a few weeks ago doesn't seem to be
as smooth as expected."
The mixed signals from Europe followed data hiccups from
the United States and China, the world's biggest economies,
earlier this week.
Calmer markets in vulnerable emerging nations like Turkey,
South Africa and Russia also helped nerves, but dealers warned
the mood remained brittle and that it a poor U.S. payrolls
report on Friday could set the bears running again.
The ADP reading on private hiring is due later on Wednesday,
and investors are likely to react badly to any disappointment.
WALL STREET SOFT
After recovering slightly on Tuesday, futures prices
foresaw Wall Street back in the red when trading resumes. As
well as the jobs report, there will also be services PMI data
just before 1400 GMT to enliven things until Friday's payrolls.
In Asia, recent strains had continued to take their toll.
Demand for safety in the yen and top-rated bonds grew on
a roller-coaster day for Toyko's Nikkei while Chinese
stocks suffered more losses.
The Nikkei eventually closed up 1.2 percent, but swings
throughout the day meant it never got close to testing
resistance at the 200-day moving average. The index has shed 14
percent this year following last year's 50 percent boom.
The underwhelming bounce in the Nikkei was all the more
disappointing following some bumper big-name company earnings.
It led investors to again bid up the safe-haven yen, with the
dollar dipping to 101.20 yen from an early top of 101.77.
"The key will be the U.S. data, and any missing of forecasts
will challenge the global recovery story and push dollar/yen
towards the 100.60 support," said Jeremy Stretch, head of
currency strategy at CIBC World Markets in London.
The euro eased a touch to $1.3510 and German Bund
yields returned to six-month lows, still driven by
speculation that the threat of deflation might nudge the ECB
into easing policy on Thursday.
Sterling was also forced lower by unspectacular UK
PMI data, though Tuesday's signal that rate cuts are no longer
on the agenda in Australia left the Aussie dollar enjoying the
view at $0.8910 after climbing a steep 2 percent.
It also rallied against the euro and yen as speculators
abandoned short positions in what had been a very crowded trade.
Market volatility remained elevated, although partly
because battered emerging market currencies like Russia's rouble
, Hungary's forint and South Africa's rand
extended their recovery into a second day.
The broader reluctance to take risks led to demand for U.S.
Treasuries, with the 10-year yield ticking down to 2.6185
percent , not far from a recent three-month low of
2.57 percent. Gold got a boost as it pushed back towards
$1,260 an ounce.
In commodities, prices for wheat were boosted by dry weather
and deteriorating crop conditions in the United States. Soymeal
and corn were both in high demand.
Broad gains in grains and natural gas lifted the Thomson
Reuters/Core Commodity Index by 1 percent, the biggest
one-day gain in nearly a month.
U.S. oil futures rose on bets that a stockpile at a
key delivery point caused by the start-up of a major pipeline
would be reduced. The March NYMEX contract added 64 cents
to $97.84 a barrel. Brent crude rose 42 cents to