April 16, 2014 / 8:05 AM / 4 years ago

GLOBAL MARKETS-Shares up on China relief, Ukraine strains remain

* China GDP grows 7.4 pct y/y, just pipping forecasts
    * Markets relieved growth was not much weaker
    * European shares rebound, Wall Street seen up 0.3-0.5 pct
    * Nikkei leads the pack after 3 pct jump, EM inches higher
    * Ukraine tensions simmer

    By Marc Jones
    LONDON, April 16 (Reuters) - Share markets made broad gains
on Wednesday after China reported economic growth a touch above
forecasts and another low euro zone inflation reading spurred
speculation about the European Central Bank's policy options. 
    China's economy grew 7.4 percent in the first quarter, from
a year earlier, pipping forecasts of 7.3 percent and dashing
speculation beforehand that growth would be nearer 7 percent
after a string of recent soft numbers. 
    The relief rippled through Asian markets, with Japan's
Nikkei ending up 3 percent - its biggest gain since
February. Hopes of more Bank of Japan stimulus also helped. 
    Bullish sentiment spread to Europe with the DAX and
France's CAC 40 both up 0.9 percent and the FTSE 100
 0.4 percent higher as mining companies - among the most
sensitive to Chinese data - regained ground. 
    Italy and Spain also rallied, with Milan 2
percent higher and Madrid up 1 percent as both clawed back some
of the 5 percent they have lost over the last week.
    "Our basic view is that it will be a gradual slowdown (in
China) rather than a hard landing," Rabobank emerging market
economist Christian Lawrence said.    
    While East-West tensions over Ukraine are keeping markets
cautious, the mood had already been lifted by a late rally on
Wall Street on Tuesday, largely thanks to some solid earnings. 
    Futures prices pointed U.S. stocks resuming 0.3-0.5
percent higher That was despite pre-opening bell news of more
legal costs and lower earnings at Bank of America 
    Global giants Google and IBM also report
later, while markets face another test when Federal
Reserve Chair Janet Yellen speaks on monetary policy and the
economic recovery at the Economic Club of New York at 1625 GMT.
    Sentiment may get a lift if she offers reassurance that any
rise in interest rates will come well after the Fed ends its
asset-buying programme.
    UK employment and earnings numbers sent sterling 
marching back towards its recent highs, as a five-year low in
unemployment and a pick-up in wage growth reheated talk of a
Bank of England rate hike early next year. 
    In the euro zone, where the European Central Bank is leaning
in the other direction and talking about more rate cuts and
unconventional policy, inflation was confirmed at a meagre 0.5
percent in March. . 
    The euro took little notice, however, rising 0.2
percent to $1.3837. There were also more bond gains for former
trouble spots Italy, Spain, Portugal and Greece. 
    "It's concerning (ECB President) Mario Draghi is already
making comments about the strength of the euro," said Bill
Street, head of EMEA investments at State Street Global
Advisors. "There is nothing he can do about it. I don't even
think aggressive policy intervention is going to work."
    Capping the upbeat mood were mounting risks in Ukraine after
Russia declared the country to be on the brink of civil war and
Kiev said an "anti-terrorist operation" against pro-Moscow
separatists was under way. 
    Ukrainian government forces and pro-Russian rebels staged
rival shows of force in eastern Ukraine on Wednesday, though
hopes remained that talks in Switzerland on Thursday between
Ukraine, Russia, the U.S. and EU could cool the situation.
    In currency markets, apart from sterling, the majors were
confined to tight orbits with the euro a fraction higher 
and the dollar edging up to 102.25 yen.
    The main mover was the New Zealand dollar which took a spill
after inflation registered a surprisingly low 1.5 percent in the
first quarter. That prompted markets to pare back expectations
on how far and fast interest rates might rise there.
    The kiwi fell to its lowest in more than a week at $0.8587
, and dragged down its Australian counterpart to $0.9359
    In commodities, gold was pinned at $1,303 an ounce,
well off Monday's peak at $1,330.90. It had tumbled about 2
percent on Tuesday on heavy stop-loss orders placed by momentum
traders as prices broke below the key 200-day moving average.
    Benchmark Brent oil rose 70 cents to a five-week high of
$110.06 on developments in Ukraine and the China data,
while U.S. crude futures were up a dollar at $104.7594.
    "The situation in eastern Ukraine has deteriorated in the
past couple of days," Harry Tchilinguirian, head of commodity
markets strategy at BNP Paribas, said. "And no one is pricing in
economic sanctions."

 (Additional reporting by Lin Noueihed in London and Wayne COle
in Sydney; Editing by Louise Ireland/Ruth Pitchford)

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