European shares rebound after losses

London: European shares and the euro on bounced off their previous session’s steep falls early on Friday despite unease over European economic forecasts, ECB crisis loan repayment data and Italian elections at the weekend.

The German Ifo business climate indicator for February rose to 107.4 from 104.2, helping to lift the mood after Thursday’s disappointing PMI data rattled markets.

It will be followed by new European Commission economic forecasts at 1000 GMT which should show whether there are any signs of recovery outside of Germany. They will also show how far off-track the likes of Spain, France and Portugal are from meeting their deficit targets this year.

European shares on the FTSEurofirst 300 rose 0.7 percent to recoup some of Thursday’s 1.5 percent slump, albeit remaining on course for a third weekly loss in four.

London’s FTSE 100, Paris’s CAC-40 and Frankfurt’s DAX were up 0.7, 1.1 and 0.6 percent respectively, helping lift MSCI’s world share index 0.2 percent as markets recovered from 2013 lows.

“The markets took a heavy dive earlier this week, but they’re showing signs of a partial recovery,” said Berkeley Futures associate director Richard Griffiths.

“The fact that traders are still buying on the dips shows that they’re hoping that the global economic recovery will continue, although it will take time.”

In the currency market, the euro extended gains after the German data, climbing 0.3 percent to just above $1.32 following its one percent drop this week.

The dollar was broadly lower, as weak data helped dampen talk of the Federal Reserve winding down its support after its minutes this week showed a minority of its members were questioning the impact of its measures.

Other than the economy, the focus will be on the weekend election in Italy. There is raft of Italian data due out including inflation and consumer confidence numbers for January.

The European Central Bank will also publish details at around 1100 GMT on how much banks plan to repay of its second batch of crisis loans when they get the first chance to return the money next week.

German Bund futures hovered around four-week highs in early trading at 143.40. Italian elections run the risk of producing a fragmented parliament which could hamper the future government’s reform efforts. Bunds are seen holding firm at least until the results come out.

“(The) extension of (the) risk averse environment depends on key event risk, particularly (this) weekend’s Italian elections,” Credit Agricole said in a note.

Asian markets were mixed on Friday with bargain-hunting offset by a weak lead from Wall Street and gloomy data out of the Eurozone.

The euro and dollar rebounded slightly against the yen after suffering big losses in the past few days, while traders were casting an eye to a general election in Italy at the weekend.

Tokyo shed earlier losses to end up 0.68 percent, or 76.81 points, at 11,385.94, Sydney jumped 0.76 percent, or 38.0 points, to 5,018.1, and Seoul added 0.18 percent, or 3.67 points, to 2,018.89.

Shanghai ended down 0.51 percent, or 11.79 points, at 2,314.16 and Hong Kong lost 0.54 percent, or 124.23 points, to end at 22,782.44.

While dealers picked up cheap shares after Thursday’s losses, sentiment remained subdued after minutes from the US Federal Reserve’s latest policy meeting stoked fears it could end its huge monetary easing sooner than expected.

In early European trade the dollar sat at 93.25 yen, compared with 93.11 yen in New York Thursday. However, the US unit - which has gained about 17 percent against the yen since November - is much weaker than the 94.00 yen seen at the start of the month.

The euro fetched 123.22 yen, against 122.81 yen in New York but well off the 125.50 yen seen on Monday.

The euro bought $1.3208, against $1.3188 in New York but compared with $1.3350 on Monday.

The euro came under pressure after a leading Eurozone growth indicator showed private business activity hit a two-month low in February.

The Purchasing Managers’ Index published by London-based Markit fell to 47.3 in February from 48.6 the previous month.

The February figures contrasted sharply with an improvement in the previous three months, which saw it hit a 10-month high in January.

“The data in Europe confirmed the idea that the recovery in Europe is still a long way off,” Matthew Sherwood, head of investment market research at Perpetual Investments in Sydney, told Dow Jones Newswires.