Dollar dips, trade thins on May Day after stormy week

Fri May 1, 2015 5:41am EDT
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By Patrick Graham

LONDON (Reuters) - A holiday in most of Europe on Friday thinned trade after a tumultuous week which has seen the dollar collapse in value, bond yields soar and stock markets in Europe and the United States weaken.

The action, driven on by shockingly poor U.S. first quarter growth numbers on Wednesday, sent the dollar down 6 percent in just over a week, Bund yields racked up the biggest two-day jump since the depths of the euro zone crisis in 2011, and European stock markets have fallen for four days in a row.

All major European markets except London, its biggest, were closed on Friday, but the euro was up another 0.3 percent to a two-month high of $1.1270.

"Weak U.S. data, a bounce in oil prices and a pick-up in European growth ... all weighed on positioning and the fallout has been seen in higher Bund yields, a stronger euro, a weaker U.S. dollar and a bounce in the commodity-currency bloc," Societe Generale analysts wrote in a note to clients.

"Now we are back to waiting to see if the U.S. economic slowdown will reverse in the coming months."

Underpinning the volatility are concerns that the world's economies, rather than recovering from a period of weakness which dates back to the 2008 financial crash, are slipping.

Asian shares recovered from session lows but struggled overnight on the back of weak U.S. corporate earnings. London's FTSE 100 dipped about 0.4 percent in the first hour of trade, with some analysts pointing to a Chinese Purchasing Managers' Index (PMI) for April that showed its manufacturing sector barely grew.

The reading of 50.1 was barely above the 50-point mark that separates growth from contraction, but was slightly better than a consensus expectation for a reading of 50, as activity in the world's second-largest economy continues to cool.   Continued...

Women wearing Hakama, or Japanese traditional Kimono, are reflected in an electronic board, showing various stock prices, outside a brokerage in Tokyo, March 23, 2015. REUTERS/Yuya Shino