August 16, 2012 / 1:57 AM / in 5 years

Global shares steady, dollar edges up on U.S. data

LONDON (Reuters) - World shares were little changed on Thursday around 3-1/2 month highs, following hints that global growth engine China is eyeing new support for its economy, while signs of stabilization in the United States buoyed the dollar.

European and global share markets have been riding high in recent weeks on hopes that new crisis plans being drawn up by the European Central Bank will put a floor under Spain and Italy’s troubles and prevent the euro from unraveling.

Overcoming the euro zone’s woes is seen as key to reversing the slowdown in the global economy. China warned on Thursday its trade outlook for the year was worsening, fingering the slide on the problems gripping Europe, its biggest customer.

Global shares .MIWD00000PUS were up 0.07 percent by mid-morning, as rises in Asia just outweighed a more downbeat Europe .FTEU3, where indexes in London .FTSE, Frankfurt .GDAXI, Paris .FCHI and Madrid .IBEX were slightly lower.

U.S. stock index futures pointed to a slightly higher open on Wall Street, with futures for the S&P 500, the Dow Jones and the Nasdaq 100 rising 0.1 to 0.3 percent.

“One of the factors why European equity markets didn’t follow the gains we saw in Asia is because the foreign direct investment data that came out of China were raising doubts over the economic boom there,” said Hans Redeker, head of global FX strategy at Morgan Stanley.

“Because the trade relationship with Europe is so developed, people fear the slower Chinese economy could be another factor undermining Europe.”

The dollar strengthened against most major currencies following a strong U.S. industry output report on Wednesday. The euro extended its recent slide to stand 0.15 percent lower against the greenback as Europe approached midday.

Hopes of additional ECB interest rate cuts were also kept alive by euro zone figures confirming that inflation - the ECB’s main focus - remained steady in July. It came two days after data showed the bloc’s economy sliding back towards recession.

U.S. STABILISATION

Over the coming few weeks markets will be watching the Jackson Hole meeting of central bankers at the end of the month, U.S. jobs data due early in September and the ECB’s policy meeting early next month for clues over crisis actions.

Oil steadied near three-month highs of $116.2 a barrel, supported by worries over possible disruptions to supply from the Middle East and a steep fall in U.S. oil inventories <O/R>.

A slew of key U.S. data is due later on Thursday, including U.S. housing starts and building permits for July, weekly jobless claims and the Philadelphia Federal Reserve Bank’s August business activity survey.

It will be watched to assess whether the world’s largest economy is regaining momentum in the third quarter, and comes after surprisingly strong retail sales added to doubts over the potential for another round of Fed support.

Question marks over additional Fed aid have been behind the dollar’s steady rise against key currencies .DXY over the last two weeks.

Some analysts warned, however, that the dollar could lose steam if coming U.S. indicators disappoint. Not all of Wednesday’s data was rosy. A gauge of manufacturing in New York state in August showed a contraction for the first time since October 2011.

“The brighter mood continuing is subject to getting past the data hurdle of the U.S. Philly Fed survey this afternoon, which will be a serious test,” said Society Generale market strategist Kit Juckes.

“The underlying story for Europe hasn’t changed; if and when someone asks for EFSF (euro zone bailout fund) help, then the ECB will buy bonds. For those who are utterly sick of debt crisis, there is a blissful lack of anything new at the moment,” he added.

Reporting by Marc Jones; Editing by Will Waterman

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