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European shares rose on Monday, with energy stocks in focus after a rise in oil prices, while the dollar lifted off four-month lows it had reached on concerns over the US economy.
The pan-European FTSEurofirst 300 stocks index opened down but quickly recovered and was last up 0.6 per cent, led higher by commodity stocks.
Brent crude rose $1 to near $68 a barrel as violence in Irag and Yemen outweighed concerns about oversupply.
Asian shares had earlier fallen as investors fretted that weak US data on Friday suggested that growth was slowing in the world’s largest economy, though the US S&P 500 index ended last week at a record closing high.
Asia-Pacific shares
MSCI’s index of Asia-Pacific shares, excluding Japan, fell 0.7 per cent, though Tokyo’s Nikkei closed 0.8 per cent higher.
Britain’s FTSE 100 index, which includes several heavyweight mining stocks, was up 0.5 per cent. However, BHP Billiton fell 4.7 per cent after a cautious debut for its South 32 spin-off.
“The valuation of mining companies relative to the overall market is well below the average of the last 15 years, and we think that the picture has started to improve,’’ said Christian Stocker, equity strategist at UniCredit in Munich.
Elsewhere, Volkswagen led Europe’s auto makers higher following an upgrade from a major bank.
The dollar rose 0.7per cent. It had dropped to a four-month low against a basket of currencies on Friday, after the United States reported industrial production fell for a fifth straight month in April and consumer confidence declined more than expected.
US inflation data
US inflation data, due on Friday, could be an important influence on the timing of the first Federal Reserve interest rate increase since 2006.
The euro, which touched its highest since early February on Friday, was down half a per cent at $1.1395.
“Short-term I think we go to $1.1350 today and, if the US inflation numbers are better than expected at the end of the week, we could push on to as low as $1.1250,’’ said Adam Myers, Head of European FX strategy at Credit Agricole in London.
The yen was down 0.4 per cent at 119.71 per dollar. The New Zealand dollar fell 0.8 per cent against the US dollar after the government announced a new capital gains tax on property investments.
US Treasury yields
US Treasury yields, which fell after Friday’s data, rose on Monday. Ten-year yields were up 2.9 basis points at 2.17 per cent.
In Europe, German 10-year yields were steady at 0.65 per cent.
Yields on low-risk global bonds have risen sharply in recent weeks, led by German Bunds, as investors price out the prospect of deflation in the euro zone.
Greek two-year yields rose 140 bps to 22.52 per cent as talks between the debt-stricken country and its international creditors remained deadlocked.
“With the Greek drama remaining noisy ... and the upcoming data flow looking supportive ... we expect a more constructive tone to prevail (for Bunds),’’ said Commerzbank strategist Rainer Guntermann.
Gold hit its highest since February in reaction to the US data before pulling back to $1,227.86.
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