* Europe shares fall 0.25 percent: global index up 0.1
percent
* Bundesbank denies report that not accepting some EZ bonds
* China data supports world stocks but investors cautious
* Australian dollar off highs; yen pares losses
* Wall Street called flat ahead of U.S. factory data
By Emelia Sithole-Matarise
LONDON, April 2 (Reuters) – World stocks were underpinned by
surprisingly firm China manufacturing data on Monday, though
further evidence that the world’s second biggest economy is
slowing, along with euro zone debt jitters, kept demand for
riskier assets in check.
Wall Street was set to start the second quarter flat as the
focus turned to equivalent U.S. figures later in the day, with
investors keen to see if recent momentum in the world’s largest
economy could be maintained.
European equities started with modest gains after data on
Sunday showed China’s official Purchasing Managers’ Index (PMI)
, which covers large factories, jumped to an
11-month high of 53.1 in March, beating forecasts.
The pan-European FTSEurofirst 300 index, which
ended the last quarter with its best first-quarter performance
since 2006, then fell.
Traders citing media reports the Bundesbank would not accept
bonds of several countries, including Portugal, as collateral.
The Bundesbank denied the reports, after which the index pared
losses to around 0.25 percent from 0.4 percent.
“This indicates nervousness about euro zone sovereign
debt is not gone at all,” a German trader said.
MSCI’s all-country world equity index was
little changed on the day, having inched up 0.1 percent earlier.
Equivalent euro zone figures, which had little impact on the
market, confirmed earlier estimates that the manufacturing
sector shrank for an eighth month, painting a grim outlook for
the region as it struggles to generate the growth needed to
tackle its debt.
MIXED OUTLOOK
U.S. stock index futures were flat to slightly softer, with
the S&P; 500 futures and the Dow Jones Industrial Average
both down less than 0.1 percent as the ISM March
manufacturing index loomed.
Economists in a Reuters survey expect a reading of 53.0
versus 52.4 in February, with some in the market saying this
could be optimistic.
“The forecasts look optimistic and therefore, particularly
if it comes in below last month’s reading, you could see…
stocks selling off again and bonds having a bit of a bounce,”
said Marc Ostwald, strategist at Monument Securities in London.
Safe-haven German government bond prices pared earlier
losses but still underperformed Italian and Spanish bonds whose
yields fell as global growth fears eased.
Italian 10-year yields were down three basis points at 5.1
percent while equivalent German yields were 2.3
basis points higher at 1.82 percent.
U.S. 10-year yields were little changed at 2.2 percent
.
The Japanese yen, which tends to gain when investors’
appetite for risk sours, pared losses as some analysts cautioned
not to read too much into the stronger-than-expected figure from
China.
The high-yielding Australian dollar retreated from
overnight highs, and was last 0.5 percent at $1.0389, having
risen more than a full U.S. cent to a peak of $1.0470 after the
Chinese data.
“It seems like investors remain cautious with service sector
data from China still to come this week and nothing to indicate
an imminent policy response from the Chinese to the slowdown in
their economy,” said Valentin Marinov, head of European G10 fx
strategy at Citi.
“If anything the latest rebound in manufacturing pushes that
policy response further into the future,” he added.
The euro inched 0.1 percent lower against the dollar to
$1.3344 while the dollar index slipped 0.1 percent
to 78.90.
