German growth helps shares, euro stage recovery

Tue May 15, 2012 8:08am EDT
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By Richard Hubbard

LONDON (Reuters) - European shares edged higher and the euro held above a four-month low on Tuesday after Europe's biggest economy reported strong growth, but fears about the impact of the region's crisis on the global outlook kept demand for safe-haven assets strong.

U.S. stock index futures also signaled that Wall St will probably open higher, although April retail sales and inflation data due later could add to concern about the recovery in the world's largest economy after more signs of slower growth in China. .N

"What we term the elephant in the room is global growth. If we see U.S. and China growth deteriorating it becomes a lot more painful for Europe," said Gary Baker, head of European equities strategy for BofA Merrill Lynch.

Germany kept hopes for growth alive when it reported that strong exports had helped its economy grow 0.5 percent in the first three months of the year, ahead of market forecasts.

Germany's performance offset zero growth in France and recession in Italy and Spain, leaving the whole 17-member euro zone economy stagnating but not in recession.

"Germany is leading the bloc, but this doesn't mean we will have a strong rebound. Austerity is not going away and southern European economies are really struggling," said Mads Koefoed, a senior economist at Saxo Bank.

The German growth number gave a solid boost to the euro, lifting it 0.25 percent to $1.2857 and away from four-month lows of $1.2814 struck earlier in the day.

But share markets were more circumspect with worries about a possible Greek exit from the euro zone pushing the FTSE Eurofirst .FTEU3 index of top European shares down 0.1 percent to 1,002 points, although away from the lowest level since December 2011 of 998.62 points on Monday.   Continued...

Traders work at their desks in front of the DAX board at the Frankfurt stock exchange May 14, 2012. REUTERS/Remote/Kirill Iordansky