April 1, 2014 / 10:01 AM / 4 years ago

GLOBAL MARKETS-Reassuring Fed gets markets off to solid Q2 start

* Wall Street seen up as stocks get off to quick start in Q2
    * Focus on ISM data after reassuring comments from Yellen
    * China's official PMI improves, but stimulus hopes intact
    * Euro zone periphery shines, gold, yen retreat

    By Marc Jones
    LONDON, April 1 (Reuters) - Investors took reassurance from
remarks by the head of the Federal Reserve and stronger-looking
emerging markets helped keep a world stocks rally alive on
Tuesday in a solid start to the second quarter.
    Wall Street looked set for a firm opening as major
currencies and bonds kept up their cautious
jockeying before this week's European Central Bank meeting and
U.S. jobs data. 
    A flurry of merger-and-acquisition activity had helped
enliven the wait for European bourses , as a
0.4 percent rise put them on track for a sixth straight day of
gains after they faltered in February and March. 
    Global shares were also supported by Fed
Chair Janet Yellen, who reinforced the need for "extraordinary"
commitment to support the U.S. economy. 
    Her comments, appearing to reduce the chances of early
interest rate rises, helped keep a lid on the dollar 
which in turn eased the euro off its recent lows to $1.3796
    The euro remained hampered though by talk the European
Central Bank, which meets on Thursday, may have to cut interest
rates again in coming months to keep deflation at bay.
    Worryingly for policymakers, Markit's Purchasing Managers'
Index on Tuesday showed that despite growth in all corners of
the euro zone, companies have resumed cutting prices to drum up
    Echoing an IMF warning on Monday, EU
Economic and Monetary Affairs Commissioner Olli Rehn said he was
anxious about decelerating inflation. 
    "I am concerned about a possibility of having a prolonged
period of low inflation in the euro zone, because this would
negatively affect the rebalancing process of the euro zone
economy," he told reporters at a meeting of EU finance ministers
in Athens.
    With Wall Street now pencilling in early next year for the
first rise in U.S. interest rates since the financial crisis
<0#FF:>, Tuesday's main focus was 1400 GMT ISM manufacturing
    "What is important will be whether the impact of the cold
weather at the start of the year has already dropped out," said
Rabobank's U.S.-focused economist Philip Marey.
    Asian stocks had climbed to a four-month
high overnight as a rebound in emerging markets helped to offset
a minor slip by Japan's Nikkei, subdued by the prospect
of new taxes cooling the economy. 
    MSCI's main EM index was at a three-month high,
having outperformed the S&P 500 in recent weeks. 
    Calm in Crimea also helped Russia's rouble and main
stock market climb to their highest since February, while
lacklustre Chinese data bolstered talk of Beijing bringing in
selective stimulus. 
    "I don't belong to the doom and gloom brigade on China,"
said Nick Beecroft, chairman and senior market analyst at Saxo
Capital Markets. "I think there is a longer-term rebalancing
taking place."
    Lower-risk assets that drew investors last month, at the
height of the Ukrainian crisis, lost ground.
    German government bonds eased and gold, one of
this year's surprise star performers, hovered near a seven-week
low at $1,285.70 per ounce.
    The yen, another traditional safe haven, slipped to a
three-week low against the dollar and a nine-month low
against the risk-sensitive Australian dollar.
    Italian and Portuguese bond yields edged back towards
historical lows and Greek bonds outperformed for a second day.
    "We had assurance from the Troika institutions that Greece
is fully financed for the coming 12 months," Jeroen Dijsselbloem
told a news conference after a meeting of finance ministers.
    Among commodities, crude futures were off three-week highs
as news of Russia withdrawing troops from the Ukrainian border
was complimented by hopes of a deal to re-open Libyan ports.
    U.S. futures stood at $101.31 per barrel, off
Friday's high of $102.24, Brent dipped to $107.58. 
Copper prices hovered just off a three-week high.
    "It's generally accepted that the Chinese economy is on a
slowing trajectory," said James Glenn of National Australia Bank
in Melbourne. "(But) we expect global demand to pick up
gradually over 2014 as the advanced economies start to see some

 (Additional reporting by Melanie Burton in Sydney; Editing by
Larry King/Ruth Pitchford)
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