China data, Greek debt talks keep mood subdued

Mon Feb 2, 2015 8:20am EST
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By Lionel Laurent

LONDON (Reuters) - European shares stalled and core bond yields held near lows on Monday following disappointing data from China, while Greek markets were volatile as the government pursued efforts to reach a compromise with its creditors.

Data pointing to weak January growth in euro zone factory activity did little to brighten the mood after China's first contraction of the PMI gauge in nearly 2-1/2 years.

Some Greek bank stocks rebounded as much as 18 percent and yields fell as Greece's leftist government began its drive to persuade a skeptical Europe to accept a new debt agreement. Finance Minister Yanis Varoufakis met his British counterpart George Osborne on Monday.

While some analysts said the new Syriza government's pitch sounded less confrontational than before, big differences between Athens and its EU partners appeared to persist and the prospect of tough negotiations knocked markets in Spain and Italy, where anti-austerity parties have gained in popularity.

"(W)e do think that (a Greek euro zone) exit would generate heightened volatility and a higher risk premia in other European equity markets, particularly in the periphery," Goldman Sachs analysts wrote in a note.

"Our base case remains that, eventually, some accommodation will be found between the new Greek government and Greece's official creditors."

The pan-European FTSEurofirst 300 .FTEU3 was down 0.5 percent at 7:41 a.m. ET, remaining in negative territory after data showed euro zone factory activity grew slightly last month as companies kept slashing prices - even as a weakened currency did little to help drive new orders from abroad.

U.S. stock index futures rose, meanwhile, indicating a modest rebound after a recent downward trend that culminated in January being the worst month for the Dow and S&P 500 in a year.   Continued...

A man walks under an electronic information board at the London Stock Exchange in the City of London January 2, 2013.  REUTERS/Paul Hackett