August 9, 2013 / 1:49 AM / 4 years ago

European shares, oil prices firm as China data improves

4 Min Read

Traders work on the floor of the New York Stock Exchange August 7, 2013.Brendan McDermid

NEW YORK (Reuters) - The dollar rebounded from a seven-week low on Friday as investors scooped up the currency at cheaper levels, while signs of stabilization in China's economy supported European shares, but the focus across assets remained on when the Federal Reserve might wind down its stimulus program.

Wall Street was slightly lower in the early morning, putting it on track to close out the week at a loss as investors found few catalysts in light volume. Comments from Fed officials this week added to the uncertainty and gave traders a reason to pull back from last week's records.

"It's very quiet, and the market is just digesting and looking ahead," said John Carey, portfolio manager at Pioneer Investment Management.

"Markets are steady in terms of valuation, with no great risks but also no screaming buys."

The repositioning of trades that were built up around the Fed's bond-buying program has been a factor in market moves this week, along with the lighter volume heading into the end of the summer.

Investors pulled a record $3.27 billion out of U.S.-based funds that hold Treasuries in the latest week, data from Thomson Reuters' Lipper service showed. The outflow from Treasury funds in the week ended August 7 was the biggest since Lipper records began in 1992.

Bond prices were lower on Friday as investors took profits on the week's gains. The 10-year Treasury note fell 3/32 in price, to yield 2.596 percent.

The Fed has said it will reduce its $85 billion in monthly purchases later this year if the economy progresses as expected. Dallas Fed President Richard Fisher reiterated on Thursday that the central bank remained open to trimming its purchases from September if economic data keeps improving, and there was no fresh information due on Friday that would help clarify the situation.

The uncertainty had driven the dollar lower this week but the currency bounced up on Friday with the dollar index .DXY gaining 0.1 percent.

"The market was very long of U.S. dollars assuming the Fed would taper sooner rather than later, and the Fed has pushed back against that," said Jane Foley, senior currency strategist at Rabobank.

The Dow Jones industrial average .DJI slipped 44.93 points, or 0.29 percent, to 15,453.39. The Standard & Poor's 500 Index .SPX was off 2.57 points, or 0.15 percent, to 1,694.91. The Nasdaq Composite Index .IXIC was little changed, edging up 0.17 points to 3,669.30.

But Europe's broad FTSE Eurofirst 300 index .FTEU3 gained 0.8 percent, encouraged by the latest data out of China, the world's second-largest economy. The data pushed stocks of mining companies higher and world shares .MIWD00000PUS added 0.2 percent.

The run of upbeat Chinese data in the past two days has helped to ease investor concerns that a sharp slowdown in its economy could derail global growth.

China said factory output rose 9.7 percent in July, beating forecasts, and retail sales grew 13.2 percent while inflation held steady. The data added to Thursday's trade figures showing exports from the Chinese economy running at a surprisingly strong pace.

The promising numbers lifted Brent oil above $107 a barrel, a day after it hit the lowest levels in more than a month. Brent was up 67 cents to $107.35, while U.S. crude gained $1.66 to $105.06.

Additional reporting by Richard Hubbard in London, Ryan Vlastelica and Julie Haviv in New York; Editing by Chris Reese

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