* U.S. markets poised for slew of data
* China's factory sector shows promise
* Euro zone PMIs show euro zone recovery intact
* ECB easing allays European election fears
* Fed minutes show no rush to raise rates
By John Geddie
LONDON, May 22 U.S. stocks are set to
consolidate gains pending a slew of data that will be closely
watched for further hints of the Federal Reserve's need to
maintain some monetary support for the world's biggest economy.
China's rebounding factory sector and another month of
strong private sector growth in the euro zone has buoyed global
markets on Thursday, while U.S. stock futures tread water
before manufacturing and labour market health checks.
"The markets will be looking for any clues of the Fed having
to change course," said Emile Cardon, senior markets economist
The United States endured a sluggish first quarter, with
poor weather blamed for underwhelming data. This has given the
Federal Reserve some pause for thought with minutes of its last
policy meeting showing it was in no rush to raise rates.
Earlier in Europe, an unexpected pickup in the service
industry was offset by lacklustre factory activity, but was
enough to show that the euro zone's fragile recovery has some
Early readings from Germany, the bloc's industrial
heartland, set a strong tone while France remained the laggard.
"This doesn't change the picture of the euro zone having one
of its best growth spells in the past three years. It's
broad-based, with the one exception being France," said Rob
Dobson, senior economist at survey compiler Markit.
European stocks initially rose 0.2 percent but then
pared those gains, as worries around the French economy pulled
the Paris bourse 0.3 percent lower on the day.
China's manufacturing industry, while falling just short of
overall growth, turned in its best performance this year, which
initially buoyed appetite for riskier assets.
Low-rated euro zone bonds stabilised as expectations the
European Central Bank will ease monetary policy overshadowed
concerns about EU elections.
Voting begins on Thursday in the first European Union
parliament election since the bloc's debt crisis blew up, and an
expected rise in eurosceptic parties threatens to destabilise
some governments or sway them to delay any painful economic
The ECB has already strongly hinted it will cut rates at its
June policy meeting, moving the deposit rate into unprecedented
"If banks have to pay interest on the money they park in the
euro system, this could revive the money market between banks,
among others, and therefore also stimulate lending to
businesses," said ECB Governing Council member Jens Weidmann.
Targeted measures aimed at boosting lending to small- and
mid-sized firms and a programme of asset purchases, known as
quantitative easing, has also been mooted.
As well as nurturing growth, the bank wants to stave off
deflation and cool a stubbornly strong euro. The euro was back
under $1.37 on Thursday, towards the lower end of a very tight
range it has held in all week.
Sterling fell against the dollar and the euro on Thursday
after UK data showed a bigger-than-expected fiscal deficit,
prompting some investors to take profits on the pound's recent
rally to 5-1/2 year highs.
Markets looking for the Bank of England to raise rates early
next year, and a surge in retail sales underlining the strength
of the UK's recovery, is keeping the pound firm.
Elsewhere, the yen eased versus the dollar on Thursday and
edged away from a 3-1/2-month high.
The yen has risen in recent weeks, partly because
speculation has receded that the Bank of Japan will ramp up
One focal point for the yen is whether Japanese investors
will step up their investment in higher-yielding overseas
assets, at a time when domestic bond yields have been held low
by the BOJ's massive monetary stimulus.
In a sign of such yield-seeking behaviour by Japanese
investors, Japan Post Insurance is investing more in Japanese
stocks and foreign bonds, according to disclosures and a person
with knowledge of the investment strategy.
(Editing by Larry King/Ruth Pitchford)