May 2, 2012 / 6:43 AM / 6 years ago

Rise in factory activity lifts shares, euro soft

LONDON (Reuters) - European shares joined in a worldwide rally on Wednesday after strong U.S. factory activity data and a pickup in Asia raised hopes of a global economic recovery, but fears over the health of the euro zone kept the single currency under pressure.

However, investors in Europe, returning after the May Day holiday, were unlikely to take on big risk positions ahead of a European Central Bank meeting on Thursday and weekend elections in Greece and France which could herald a softening in austerity measures.

Friday’s U.S. jobs report will be key to supporting the growing confidence across all markets.

“It is prudent to watch and wait at the moment,” said Lauren Rosborough, senior currency strategist at Societe Generale.

“There is so much in the way of information and given the lack of liquidity, with it being Golden Week in Japan and the May Day holiday yesterday, it will take a while for the market to make an assessment”.

The FTSE Eurofirst index of top European shares was up 0.9 percent at 1,057.30 points with gains of over one percent seen in the share markets of Germany, Italy and Spain. Britain’s FTSE 100 eased slightly as it had been open on Tuesday and rose sharply when the U.S. data was released.

Solid gains across Asian markets, coming after the Dow Jones Industrial Average posted its highest level in more than four years, helped lift the MSCI world equity index by 0.1 percent to 329.62.

The euro was slightly softer against the dollar at $1.3215 after touching a four-week high of $1.3277 in the previous session.

Euro zone data on employment and industrial activity for April due later will provide a term test of sentiment, while debt markets are focused on a debt sale by Spain on Thursday, which will provide the first test of sentiment since its two-notch rating downgrade last week.

Additional reporting by Jessica Mortimer; editing by Philippa Fletcher

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