* Euro dips below $1.30 after weak German PMI data
* European shares gain on rate cut hopes
* Yen broadly firmer on safe-haven demand
* Commodities slip as China data adds to demand concerns
By Richard Hubbard
LONDON, April 23 The dollar hit a two-week high
against the euro, commodities fell and German bond prices jumped
on Tuesday when data revealed slower business activity in
Germany and China, the world's two biggest exporters, fuelling
global growth fears.
European shares, however, were given a boost by the evidence
that Europe's biggest economy was slowing, as that strengthened
a view among investors that the European Central Bank will cut
its key interest rate at an upcoming policy meeting on May 2.
The FTSEurofirst 300 index was up 1 percent at
1,167.01 points by midday, and U.S. stock index futures pointed
to firm start on Wall Street on the back of strong corporate
"Right now we are in a place of sub-par global growth, and
the euro zone is lagging behind, stuck in recession," said Nick
Kounis, head of macro research at ABN-AMRO.
"It makes us more confident of an ECB rate cut in May, but
really the ECB should be doing more and thinking of other ways
to stimulate growth," he said.
The latest Purchasing Managers' Indexes (PMIs) for the euro
area showed business activity in Germany shrank for the first
time in five months in April, while a broader gauge of the wider
17-nation zone showed the region still mired in recession.
A similar survey for U.S. manufacturing is due later in the
day and is expected to show that growth in factory activity
there slowed slightly this month, while an earlier Chinese PMI,
produced by HSBC, revealed factory output slipping in April.
In the wake of the data a search for safety by investors led
to gains in the yen against both the euro and the dollar, while
the greenback rose against a basket of major currencies, and
U.S. Treasuries and German government bond prices also rose.
The euro tumbled more than 1 percent against the Japanese
currency to 127.87 yen and fell 0.6 percent against
the greenback to $1.2990, threatening a decisive break of
the $1.30 to $1.32 range it has held for the past few weeks.
The yen's gains left the dollar down 0.6 percent at 98.66
yen but not far from 100 yen, a level most market players
still believe will eventually be broken.
"The dollar has tested the psychological 100 yen level
twice, and it will eventually be broken," said Niels
Christensen, currency strategist at Nordea in Copenhagen.
Against a basket of major currencies the dollar, often
considered the ultimate safe haven, gained 0.3 percent to 82.90
In the debt market German Bund futures hit their highest
level since June 1, touching a peak of 146.69, up 34 ticks. The
10-year cash bond yield dropped 1.5 basis points to 1.21 percent
The U.S. Treasury 10-year note rose 9/32 in price to yield
1.664 percent <US10YT=RR >, its lowest since mid-December 2012
and down 3 basis points from late U.S. trade on Monday.
The economic headwinds from China had earlier hit Asian
shares, sending MSCI's broadest index of Asia-Pacific shares
outside Japan down 0.5 percent. Chinese shares
posted their worst daily loss in nearly a month.
MSCI's world equity index, which is heavily
weighted toward U.S. shares, was up 0.25 percent, helped by Wall
Street gains on Monday.
The HSBC report on China, its first economic indicator for
the second quarter following weaker-than-expected growth in
first-quarter gross domestic product, weighed heavily on
commodity markets worried about the outlook for future demand.
June Brent oil futures fell 80 cents to $99.58 a barrel
, while U.S. crude for June delivery was down 62
cents at $88.57.
"China and German data disappointed, so it's not a big
surprise that oil comes off, and the technical picture points to
another push lower," said SEB analyst Bjarne Schieldrop.
London copper futures fell to an 18-month low of
$6,762.25 a tonne before snapping back to $6,845 a tonne by
midday, down 1.3 percent on the day.
Gold dropped around 1 percent to $1,415 an ounce on
the growth concerns but was also hit by reports that investors
in exchange traded funds are continuing to liquidate positions.
Gold has recovered some ground after last week's tumble, but
ETF selling sums up weakening confidence in the metal.