Solid start to Q2 for European stocks, dollar after blowout Q1

European stock markets made a solid start to the second quarter on Wednesday as data pointing to a gradual recovery in the euro zone economy gave investors fresh impetus after their blowout first few months of the year.

Europe’s benchmark FTSEurofirst 300 recovered from a early wobble to put London’s FTSE Germany’s DAX and France’s CAC up 0.5, 0.3 and 0.5 per cent, higher respectively as core bond markets yields nudged higher.

Crude oil

Crude oil prices maintained their decline as an extension of talks between Iran and world powers on Tehran’s nuclear capabilities drove hopes of an agreement that could also ease export sanctions on the OPEC member.

Currency markets were mostly knocking about in recent ranges after a tumultuous few months. The star of Q1, the dollar, edged up to 120.15 versus the yen and to $1.0750 per euro after the currency shared by 19 countries made its worst ever start to a year.

“I would be surprised if we had a similar quarter again considering the performances of the dollar and the euro over the last few quarters,’’ said Derek Halpenny, European head of global markets research at Bank of Tokyo Mitsubishi in London.

“With no policy (rate hike) announcement likely in the second quarter from the Federal Reserve, that reduces the scope for significant moves... Also the bulk of global easing that has helped fuel the dollar is probably behind us now.’’

ECB stimulus

There were more signs that the European Central Bank’s €1 trillion stimulus programme — which has driven the huge currency market shifts — is bearing fruit.

Manufacturing activity across the euro zone accelerated faster than previously thought last month and hit a 10-month high, revised data showed, adding to signs the bloc’s economy is recovering.

Delicate China

Data from China was less robust, bolstering the view that Beijing will have to provide more stimulus to keep growth on track, with some analysts eyeing moves to directly push down the value of the yuan.

The HSBC/Markit China Manufacturing Purchasing Managers’ Index (PMI) came in at 49.6, slightly higher than a preliminary “flash’’ reading of 49.2 but still below the 50-mark which separates contraction from expansion.

An employment subindex contracted for a 17th straight month, falling to its lowest since August 2014.

“The latest data indicate that domestic and foreign demand remains subdued amid weaker market conditions,’’ said Annabel Fiddes, an economist at Markit.

Shares in Shanghai gained 1.4 per cent on the hope of more stimulus but the rest of Asia was subdued.

Bourses that ended in the red include Japan, South Korea, Australia, Malaysia and Indonesia. Japan’s Nikkei sank 0.9 percent after a lacklustre Bank of Japan business survey.

Greece debt talks

After Greece failed on Tuesday to reach an initial deal on reforms with its lenders, Athens was the only bourse in the red in Europe and its government bond yields inched close at 12 per cent.

The rising dollar helped drive nickel to its lowest in 6 years before a bounce, copper slipped and gold struggled at $1,180 an ounce after ending March with a loss of 2.4 percent.

The Iran talks kept the squeeze on oil markets. Brent crude for May delivery, which fell 8 per cent over the last week, was down 8 cents at $55.03 a barrel. US crude was 25 cents lower at $47.35.

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