April 23, 2014 / 8:41 AM / in 4 years

GLOBAL MARKETS-Share rally peters out, euro lifted by PMI boost

* Euro zone PMI bolsters recovery prospects, lifts euro
    * China PMI shows growth still slowing
    * Aussie dollar plunges as inflation falls
    * Subdued U.S. opening expected, earnings deluge eyed

    By Marc Jones
    LONDON, April 23 (Reuters) - European shares edged down on
Wednesday after three days of gains as signs of a slowing
Chinese economy and rising worries about Ukraine offset
reassuring European economic data.
    After racing higher on Tuesday on a wave of takeover
activity, European stocks fell 0.3 percent as investors locked
in some of the gains and turned their attention to the region's
broader economic outlook.
    U.S. stock futures also pointed to a subdued start for Wall
Street on a heavy day of company earnings as well as U.S.
PMI readings.  
    The PMI readings for Europe showed that France's economy was
still lagging, but Germany continued to power the euro zone's
recovery. Europe's private sector has started
the second quarter on its strongest footing in nearly three
years, according to the PMIs, although new orders were again
mainly buoyed by price cuts.
    "It's pretty encouraging considering what we have seen for
years. We are looking at 0.5 percent quarter-on-quarter GDP
growth if we continue to see this level," said Chris Williamson,
chief economist at Markit, which compiles the PMIs.
    "Clearly we should see the pace of growth continue into May
and possibly June as well. Companies are beginning to feel this
is something sustainable."
    The data lifted the euro and the region's government
bonds, but after a 3 percent rise in the last two days
some stock market investors decided to in their gains.
    London's FTSE dipped 0.1 percent, but a 0.4 percent
drop by Paris's CAC 40 and 0.3 percent declines in
Frankfurt and Milan were the biggest drag on
the pan-European FTSEurofirst 300. 
    Mixed earnings were also a factor. Swedish mobile telecom
equipment maker Ericsson fell almost 5 percent after
it missed targets. So far this reporting season, 53 percent of
companies have beaten or met expectations, compared with 58
percent in Q4 2013.    
    U.S. analysts were already sifting through some estimate-
topping numbers released before the market opened, from the
chemicals giant Dow Chemical and airline Delta.
    In Asia, the main economic data of the day had been less
    China's stock markets  fell again and the yuan
 tumbled to 16-month low after a survey showed
manufacturing activity in the world's second-biggest economy was
still slowing in April, and the country's central bank moved
again to keep its currency ticking lower. 
    The HSBC/Markit flash Purchasing Managers Index (PMI) for
April rose to 48.3 from March's final reading of 48.0, but was
still below the 50 line separating expansion from contraction.  
    The Australian dollar tumbled to a two-week low
after data showed surprisingly low inflation in the first
quarter. It slid more than one U.S. cent to $0.9277 and
interbank futures <0#YIB:> rallied as the market reassessed the
chances the Reserve Bank of Australia will raise interest rates
before year-end.
    "The fall in the Aussie was quite large considering that
interest rate markets weren't pricing a hike until mid-2015
anyway," said Sean Callow, currency strategist at Westpac. "The
slide gives the impression that Aussie bears have been waiting
for a reason to bash it."
    Back in Europe, the euro bounced to $1.3845 before
fading slightly, as the upbeat PMI data and more encouraging
news on Greece and Spain's finances countered recent talk of
interest rate cuts from ECB policymakers. 
    The pound climbed near a four-year high as the Bank
of England flagged how Britain's economy was gaining speed.
    The sobering economic news on China added to a host of
country-specific issues to drag down most emerging Asian
currencies and put emerging-market stocks in the red for a third
    The Indonesian rupiah fell to its weakest in more
than seven weeks on rising demand for dollars at month's end.
Turkey's lira hovered near three-week lows as traders
awaited a rate decision from the country's dovish central bank.
    In commodity markets, Brent crude held above $109 a
barrel, just off a six-week high of $110.36 reached last week,
propped up by the stand-off in Ukraine.
    The U.S. threatened Russia with more sanctions on Tuesday
and Ukraine's government said on Wednesday it was restarting an
"anti-terrorist operation" to eliminate armed pro-Russian
separatist groups in the east of the country. 
    That kept both Ukrainian and Russian assets under pressure.
Stocks in Moscow fell 0.6 percent to a one-week low and Russia's
central bank shifted its target exchange rate as it continued
interventions to steady the rouble. 
    It also helped steady gold after it had touched its
lowest in more than two months on Tuesday, weighed down by this
week's gains in Wall Street stocks and as outflows from physical
gold funds pointed to weak investment appetite. 

 (Additional reporting by Jonathan Cable; Editing by Larry King)
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