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Global shares up on China relief, Ukraine strains remain

A man smokes a cigarette outside The London Stock Exchange November 11, 2013. REUTERS/Eddie Keogh

By Marc Jones

LONDON (Reuters) - Share markets made broad gains on Wednesday after China reported economic growth a touch above forecasts, a relief for investors who had feared a much weaker outcome.

China's economy grew 7.4 percent in the first quarter, from a year earlier, pipping forecasts of 7.3 percent. That was welcome news to many given whisper numbers nearer 7 percent, following a string of soft numbers recently.

Other Chinese data for March was mixed, with industrial output a shade under estimates but retail sales picking up.

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 FTSE 100 and DAX opening up 0.8 and 0.9 percent respectively and France's CAC 40 1.2 percent higher.

Italy and Spain also rallied, with both up more than 1 percent as they clawed back some of the 6-7 percent they have given up over the last week.

"It (rises in European stocks) is just ripples continuing on from Asia," Rabobank emerging market economist Christian Lawrence said.

"China is still on a downward path on growth but clearly the market took some relief in that number ... our basic view is that it will be a gradual slowdown rather than a hard landing."

The mood had already been lifted by a late rally at the end of a rollercoaster session on Wall Street, thanks mainly to some solid earnings reports.

The Dow rose 0.55 percent and the S&P 500 0.68 percent. The Nasdaq lagged with a 0.29 percent gain, stabilizing after recent sharp falls.

European focus was quickly switching to the day's slate of data releases. UK employment and earnings numbers and updated March inflation figures for the euro zone are all likely to feed the debate on how much ECB and Bank of England policies could potentially diverge this year.


Markets face another test later when Federal Reserve Chair Janet Yellen speaks on monetary policy and the economic recovery before the Economic Club of New York at 1625 GMT (12.25 p.m. EDT).

Sentiment may get a lift if she offers reassurance that any rise in interest rates will come well after the Fed finishes its asset-buying program.

Capping the mood was caution over the situation 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.

In currency markets, the majors were confined to tight orbits with the euro a fraction higher at $1.3823 while the dollar edged up to 102.20 yen.

The main mover was the New Zealand dollar which took a spill after the country reported inflation at 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 $1,301.60 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 dipped 9 cents to $109.27 on developments in Ukraine and the China data, while U.S. crude futures were up 19 cents at $103.94.

"A lot of China watchers have been focused on the idea that the February (industrial production) number was distorted by the (Chinese New Year) holidays and were looking for the March data to confirm that was the case. But that hasn't come through," said Michael McCarthy, CMC Markets chief strategist in Sydney.

(Additional reporting by Wayne Cole in Sydney; Editing by Louise Ireland)