February 19, 2013 / 9:11 AM / 4 years ago

GLOBAL MARKETS-Shares rise as Germany boosts recovery hopes

* European shares rise 0.9 percent after strong German data
    * Yen firms as Japan plays down foreign bond buying plan
    * Euro steady after Draghi says eyeing down draft on
inflation

    By Marc Jones
    LONDON, Feb 19 (Reuters) - European shares saw their
strongest gains in a week on Tuesday after a pick-up in German
economic sentiment data bolstered hopes the region's biggest
economy would rebound quickly from its recent weakness.
    Wall Street was expected to return from a three-day weekend
with further gains, as it looks to build on the seven straight
weeks of rises that have pushed the S&P 500 to a five-year high.
    Following last week's GDP figures showing that the euro zone
saw a weaker end to 2012 than expected, Germany's ZEW survey of
investors and analysts brightened the mood as it comfortably
beat expectations to hit its highest level since April 2010.
   
    "Financial market experts have made their peace with the
weak fourth quarter of 2012," said ZEW president Wolfgang Franz
after its headline figure jumped to 48.2 points from 31.5 in
January. "In their opinion the German economy faces less of a
headwind from the euro crisis than throughout the last months."
    European stock markets, which had lost around 1.5 percent
since the end of January, extended early gains after the data to
put them on track for their biggest advance in a week.
    The FTSEurofirst 300 had added 0.9 percent by 1330
GMT, led by a 1.5 gain on Paris's CAC-40 and 1.2 percent
rises on Frankfurt's DAX, in Milan and in
Madrid.
    "Even if the real economy only lives up to half the
expectations, ... any fears of a technical recession should turn
out to have been unjustified," ING economist Carsten Brzeski
said of the German outlook following the ZEW survey.
    The euro also rose and German government bonds turned
negative after the figures, though both moves proved to be
brief. The euro was little changed at $1.3350 as
afternoon trading gathered pace and benchmark Bunds 
were back in positive territory at 142.82.
    European Central Bank President Mario Draghi's reiteration
on Monday that the bank would continue to monitor the euro's
recent strength kept downward pressure on the currency, as some
took the comments as a hint that a rate cut could be on the
cards. 
    Underscoring the drag Europe's economic sluggishness is
creating, new figures showed car firms had their weakest January
since the records of the Association of European Carmakers began
in 1990, with sales dropping 8.5 percent. 
    "What most people are now waiting for is what the ECB
meeting brings next month and whether we get a rate cut," said
Tobias Blattner at Daiwa Securities in London.
   

    YEN FIRMS     
    Elsewhere in the currency market, the yen rose after
Japanese ministers played down talk of foreign-bond buying by
the country's central bank, and sterling, another
currency in the spotlight, remained near a seven-month low.
    The yen has dropped 20 percent against the dollar since
mid-November, sparking talk of a "currency war", though Japan's
expansive policies, which have driven the fall, escaped direct
criticism from G20 policymakers last week. 
    Finance Minister Taro Aso told a news conference that he was
not considering foreign-bond purchases as a part of monetary
easing, while Economy Minister Akira Amari said Prime Minister
Shinzo Abe's comments to that effect on Monday simply referred
to policy options countries have in general. 
    Their comments sent the dollar down to 93.50 yen. The
euro eased 0.5 percent to 124.86 yen, well below its
peak since April 2010 of 127.71 yen touched on Feb. 6.
    The pound hovered at $1.5460, inching up from
Monday's low of $1.5438. But with Bank of England minutes due on
Wednesday, the recovery looked vulnerable to any further
suggestion policymakers would like it weaker. 
    
    CONSOLIDATION MODE
    MSCI's world equity index was slightly
higher ahead of the restart of U.S. trading, though markets have
been falling for two weeks since a big run-up in January.
    After Monday's day off, U.S. stock index futures pointed to
a higher open on Wall Street, with futures for the S&P 500
 up 0.2 percent, Dow Jones futures up 0.1 percent
and Nasdaq 100 futures up 0.2 percent.
    The gradual improvement in the global economic environment
has supported commodities, though concerns about Italy's
election this weekend and talks in Washington over a package of
budget cuts set to kick in on March 1 have helped limit gains.
    Silvio Berlusconi, seen as a threat by some investors to
Italy's fiscal reform programme if he defies the polls and
regains power, grabbed headlines again as he warned "some
countries" might have to leave the euro unless the ECB becomes a
lender of last resort.     
    Oil prices were little changed at $117.46 a barrel 
as investors awaited the return of U.S.-based traders and the
release of U.S. oil inventory data on Wednesday and Thursday.
    Platinum prices, meanwhile, rose to near $1,700 an ounce,
closing back in on the $1,740 high hit earlier this month, when
Anglo American Platinum shut all its operations in
South Africa after workers stayed away following violence at one
of the mines on Monday. 
    Gold rose for a second straight session when traders in
China, returning from a week-long break, bought up the precious
metal, having seen prices drop 3 percent in their absence.
 
    Spot gold edged up 0.1 percent to $1,610.94 an ounce,
 just above the six-month low of $1,598.04 hit late last week.
    Citigroup metals strategist David Wilson said: "There is a
general perception that things are getting better in China and
in the United States, so the argument would be, 'why would you
hold gold?'"

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