China PMI lifts shares, commodities, euro soft ahead of ECB

Mon Jun 2, 2014 4:36am EDT
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By Marc Jones

LONDON, (Reuters) - Reassuring Chinese factory data and another record high for Wall Street lifted world stocks and commodities on Monday, as markets waited to see how far the European Central Bank will go with policy easing plans this week.

China's manufacturing activity expanded at the fastest pace in five months in May, data showed on Sunday, reinforcing views that the world's second-largest economy is regaining momentum after a wobble at the start of year.

Basic resources stocks .SXPP including miners and other commodity companies were the biggest gainers as the main bourses in London .FTSE and Frankfurt .GDAXI started what is set to be a busy week for markets on a positive note. .EU

After weeks of speculation about interest rate cuts and additional unconventional policy easing measures, the ECB meets on Thursday with expectations running extremely high.

The euro fell 0.15 percent to $1.3610 EUR=, not far from a three-month low of $1.3586 touched on Thursday. It also fell against the pound EURGBP=D4 to 81.25 pence, with diverging monetary policy outlooks between the ECB and the Bank of England, which also meets this week, underpinning the British currency.

Ahead of the ECB meeting, German inflation data for May due at around 1200 GMT will be closely watched. The ECB is increasingly concerned that extremely low inflation could be becoming entrenched in the euro zone. <ECONALLDE

Like many banks, Societe Generale expects the ECB to cut rates on Thursday and start charging banks that deposit cash with it. But its economists also expect a far more aggressive 300 billion euro ($409 billion) Aset Backed Securities (ABS) purchase programme to be announced.

"We are expecting quite a slew of measures from the ECB," said Alvin Tan, an FX strategist at Societe Generale in London.   Continued...

Employees of the Tokyo Stock Exchange (TSE) look at a monitor at the bourse at the TSE in Tokyo March 3, 2014.  REUTERS/Issei Kato