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GLOBAL MARKETS-Shares bounce after worst week of year, Brexit stresses sterling

Published 2019-03-11, 06:30 a/m
GLOBAL MARKETS-Shares bounce after worst week of year, Brexit stresses sterling
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* China shares jump near 2 pct after c.bank pledges support

* European shares inch higher but German data weighs

* Pound slips amid talk of Brexit votes being downgraded

* China lending, money supply data miss forecasts

By Marc Jones

LONDON, March 11 (Reuters) - Talk of more stimulus from China helped world share markets regain some ground on Monday after a slew of concerning economic data and growth warnings from central banks triggered their worst weekly performance so far this year.

China's main bourses made back almost half the 4 percent they lost in Friday's mauling as the country's central bank chief pledged more support, but not everywhere was so spritely. pan-European STOXX 600 barely managed a 0.2 percent gain .STOXX in early trade as an unexpected drop in German industrial data also kept the euro near a 20-month low and nudged Bund yields back toward zero. /FRX GVD/EUR

London's FTSE .FTSE made a more impressive 0.8 percent but that was partly the flip side of a near three-week low for the pound as the chances of Prime Minister Theresa securing support for her Brexit deal at home this week looked increasingly dim. is due to leave the EU in 18 days.

Kallum Pickering, an economist at Berenberg, said a delay to Brexit would be modestly positive for sterling as it would cut the near-term risk of the UK leaving without a transition period in place to minimise economic disruption.

"However, it would not completely eliminate the hard Brexit risk which could still come at the end of a delay or as a result of a second referendum," he added.

The day's European FX gainer was Norway's crown, after strong inflation data there raised expectations among economists that its central bank will increase interest rates again soon.

With markets trading in a period of low volatility, investors have rushed to buy currencies where central banks are still raising rates or economic data has exceeded expectations, indicating a brighter economic outlook.

"This makes (a) March rate hike from Norges Bank a complete done deal, which is a positive for the currency," Nordea strategists said.

The optimism over Norway's economic outlook was in contrast to the general caution over the broader European economy after the European Central Bank last week slashed its growth forecasts for 2019 and postponed its expectations of a first rate hike.

Short euro bets, already near a 2-1/2 year high, according to latest futures positioning data for the week ending March 5, is likely to receive a further boost in the coming days, investors said.

The single currency EUR=EBS shuffled sideways at $1.1247 after falling 1.2 percent last week, its biggest weekly loss in more than six months.

WALL STREET

Wall Street futures were pointing to a fractionally higher restart for U.S. markets later after their worst week of the year last week. .N

Overnight, MSCI's broadest Asia-Pacific index .MIAPJ0000PUS had climbed 0.4 percent, paring a quarter of Friday's 1.6 percent fall. Japan's Nikkei .N225 gained 0.5 percent too after four consecutive sessions in the red last week. .T

China's blue-chip CSI300 index .CSI300 jumped 1.9 percent after Friday's 4.0 percent fall, which followed poor trade data and a major local bank issuing a rare "sell" rating on a major insurer. .SS central bank on Sunday pledged further support by spurring loans and lowering borrowing costs. came as data showed new bank loans in China fell a bit more than expected in February, while money supply growth also missed forecasts. markets were still digesting Friday's news that the U.S. economy created only 20,000 jobs in February, the weakest reading since September 2017.

As a result, bond yields dropped, with the 10-year Treasury hitting a two-month low of 2.607 percent US10YT=RR . It last stood at 2.638 percent.

The two-year yield also hit a two-month low of 2.438 percent US2YT=RR , nearing the current Fed funds rate around 2.40 percent USONFFE= . Fed funds futures 0#FF: are now pricing in a more than 20 percent chance of a rate cut this year.

"The headline reading was so weak that the market could have reacted more aggressively. I would say markets reacted relatively calmly because there were elements that suggest weakness is temporary," said Tomoaki Shishido, fixed income strategist at Nomura Securities.

While job growth was weak, average hourly earnings rose 11 cents, or 0.4 percent, raising the annual increase to 3.4 percent, the biggest gain since April 2009.

Retail sales figures for January due at 1230 GMT will be a key focus given December's surprisingly weak reading.

Oil was the main focus for commodity markets after Saudi oil minister Khalid al-Falih indicated that an end to OPEC-led supply cuts was unlikely before June.

U.S. West Texas Intermediate (WTI) crude CLc1 futures rose 0.5 percent to $56.35 per barrel. Brent futures LCOc1 went up 0.4 percent to $62.98 a barrel.

Gold XAU= eased about 0.1 percent to $1,296.62 per ounce, after briefly breaching $1,300 for the first time since March 1 in the previous session. GOL/

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