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GLOBAL MARKETS-Improving data boosts to euro, stocks
January 3, 2012 / 8:35 AM / in 6 years

GLOBAL MARKETS-Improving data boosts to euro, stocks

* U.S. stocks expected to open higher

* Oil spikes up on Iran tensions

* German unemployment surprises

By Richard Hubbard

LONDON, Jan 3 (Reuters) - Improved economic data from China and Germany boosted the outlook for the global economy on Tuesday, sending U.S. stock futures and the euro higher, but rising tension in the Middle East Gulf pushed crude to around $110 a barrel.

Global stocks, as measured by the MSCI world equity index , were up over 0.6 percent after ending 2011 down 9.2 percent.

Investor attention is focused on the U.S. Institute for Supply Management (ISM) Index of National Factory Activity for December due for release at 1500 GMT, with economists in a Reuters survey expecting a reading of 53.2 versus 52.7 in November.

“The data we’ve seen coming from the U.S. has actually surprised on the upside over the past few weeks and I think that’s going to continue,” said Ian Stannard, currency strategist at Morgan Stanley.

Signs of improved growth in the United States may also cool any speculation about another round of money-printing by the Federal Reserve, improving the outlook for the dollar.

The FOMC releases minutes from its Dec. 13 meeting at 1900 GMT.


ICE Brent crude futures climbed 2.45 percent to a high of $110.35 a barrel, on the first day of trading for 2012. U.S. crude futures were up $2.29 at $101.11 a barrel after hitting an intraday high of $101.68.

Military exercises in the Gulf by Iran and the movement of U.S. naval vessels in the area has raised fears of a confrontation between Tehran and Washington that could cut off oil exports from the region.

Iran has said it could shut the Strait of Hormuz, through which 40 percent of world oil is shipped, if sanctions were to be imposed on its crude exports..

Meanwhile the euro and European stocks got a lift from news that German unemployment fell more than expected in December with the jobless rate at 6.8 percent, its lowest level since the unification of Germany two decades ago.

The euro rose 0.7 percent versus the U.S. dollar to a session high of $1.302, boosted by the better-than-expected economic data that is fuelling demand for perceived riskier currencies and has triggered a short-covering rally.

It was above a 15-month low of $1.2858 hit last week although persistent worries about the region’s on-going debt crisis and the scale of the first quarter borrowing needed to refinance maturing debt is expected to cap any gains and hit demand for the region’s lower-rated sovereign debt.

“The maturing of debt is going to give investors the opportunity to take some of those funds back out of Europe, to repatriate some of those funds to reduce their exposure,” said Morgan Stanley’s Stannard.

Currency speculators boosted bets against the euro to a record high in the last week of December and built up the biggest long dollar position since mid-2010, data from the Commodity Futures Trading Commission showed on Friday.


A surprisingly strong rise in the purchasing managers’ index for China and a slight improvement in the euro zone PMI have encouraged risk appetite, especially in commodity-related markets.

China’s official Purchasing Managers’ Index rose to 50.3 in December from 49 in November - moving above the 50 mark which separates expansion from contraction.

Data on Tuesday also showed the official Purchasing Managers’ Index for non-manufacturing sectors had rebounded strongly in December to 56.0 from 49.7 in November.

British manufacturing joined the trend, beating expectations in December and stabilising after a two-month decline as orders from China and Germany picked up, data showed.

But over the fourth quarter as a whole the UK PMI reading suggested the sector registered its worst performance since the second quarter of 2009, when Britain was mired in recession.

The improvement in the PMIs encouraged European stocks to a fourth consecutive session of gains. The FTSEurofirst 300 index of top European shares was up 0.5 percent at 1017.03 points after rising as high as 1,022.85, its highest level in more than two months.

The heavily commodity-weighted UK FTSE 100 index was up 1.2 percent, lifted by strong gains in mining companies Xstrata and Kazakhmys, both up around 4 percent.

Commodity currencies have also seen a boost with the Australian dollar up over 1 percent versus the greenback to $1.036.


Spot gold was up around 1.6 percent at $1,590.30 an ounce, also helped by investors renewed appetite for riskier assets.

Copper hit a three-week high, lifted by fund allocations at the start of the year and by the news of an expansion in China’s manufacturing activity, which boosted hopes that demand for industrial metals will increase.

Three-month copper on the London Metal Exchange CMCU3 rose about 0.9 percent to $7,673.25 a tonne.

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