European stocks bounce back from worst week in six
European stocks rebounded from last week s heavy selloff on Monday and the dollar rose broadly, with investors reassured by stability in China s yuan exchange rate after it was fixed slightly higher for the second day running.
Asian markets were more volatile, however, and emerging market currencies and oil prices were anchored near historic lows.
The FTSEuroFirst 300 index of leading shares was up 0.8 percent at 1,540 points . FTEU3, clawing back some of last week s 3 percent decline - its biggest loss in six weeks. Wall Street was expected to open higher SPc1.
Germany s DAX was up 0.6 percent .GDAXI and France s CAC 40 up 0.7 percent .FCHI. Britain s resource and commodity- heavy FTSE 100 . FTSE, however, was 0.2 percent lower. "European equities, based off results thus far, are showing slightly stronger earnings than Q1, with financials leading earnings growth," said Brenda Kelly, head analyst at London Capital Group.
Alstom shares rose as much as 7 percent after two people familiar with the matter told Reuters General Electric (GE.N) was expected to secure European Union approval for a proposed 12.4 billion euro bid for its power business. Shares in Hennes & Mauritz (HMb.ST) advanced 2.4 percent after the fashion retailer reported higher sales.
Earlier in Asia, MSCI s broadest index of Asia- Pacific shares outside Japan .MIAPJ0000PUS fell 0.8 percent, adding to last week s loss of 2.6 percent suffered after Beijing s devaluation of the yuan buffeted global financial markets and fanned concerns about China s economy.
The yuan fell more than 4 percent at one point last week, pulling down riskier assets including emerging currencies globally amid fears the devaluation would spark a global currency war. But China slowed the pace of the currency s drop, and on Monday fixed it higher for the second day in a row.
Emerging currencies continued to struggle. The rouble hit a six-month low RUB=, Malaysia s ringgit held near a 17-year low MYR= and Turkey s lira fell to its weakest on record. With the big focus whether the Fed raises interest rates as early as next month, the dollar was the major winner in currency markets.
"With reduced volatility, fears on passthrough from the China devaluation to Fed policy should subside and this may see focus shift back to the situation in the United States," wrote Todd Elmer, head of Citi s G10 strategy in Singapore. The euro fell a third of one percent to $1.1072.
Euro investors also weighed up the growing likelihood that the Greek government will call a confidence vote following a rebellion among lawmakers from the ruling Syriza party over the country s new 86 billion euro bailout deal. The dollar gained 0.2 percent against the yen JPY= after Japan s economy shrank in the second quarter.
The 0.4 percent contraction wasn t as large as the 0.5 percent fall expected, but concerns that the third quarter may see only mild improvement are rekindling expectations of further monetary easing by the Bank of Japan.
In bond markets, the benchmark 10year U.S. Treasury yield slipped two basis points to 2.18 percent. Crude oil, another market churned last week by China s shock currency move and its potential impact on demand for commodities, continued to struggle in the wake of global oversupply concerns.
US crude CLc1 was down 1.8 percent at $41.73 a barrel, within reach of a six- year trough of $ 41.35 struck on Friday.
Tokyo stocks edged up after data showed Japan's economic contraction was less severe than expected, while volatility subsided across major markets as the Chinese yuan stabilised after last week's surprise devaluation.
Japan's Nikkei share average gained 0.5 percent to 20,620.26 while the broader Topix rose 0.5 percent to close at 1,672.87, with turnover sinking to its lowest level since early April with many market players away for Japan's "obon" holidays.
Concerns over a slowdown in China kept most investors away from global cyclical shares in favour of those linked to domestic demand.
Hong Kong's key share index fell to a more than one-month low on Monday, ignoring a firmer close in Chinese stocks, as fears of further depreciation in the yuan drove investors to switch their focus back to the weak local economy.
The Hang Seng index fell 0.7 percent, to 23,814.65, the lowest close since July 8. The China Enterprises Index lost 0.9 percent to 10,962.24 points, the lowest close since December 2014. Analysts said Hong Kong's market suffered from the negative implications of yuan devaluation, the weakening economic outlook and the imminent U. S. interest rate hike, hammering sectors including airlines, property and autos.