World shares subdued by mixed China, euro zone PMI data

European markets largely subdued, main bourses down as much as 0.6%

World shares hovered near record highs on Thursday after downbeat Chinese manufacturing data kept pressure on Beijing for more stimulus and the Federal Reserve signalled higher US interest rates are still some way off.

European markets were largely subdued in morning trading, however, as weaker-than-expected German purchasing manager data (PMI) offset firmer figures in France. Equivalent US figures are due at 1345 GMT.

Wall Street, which will also have a rise in jobless claims to digest, was expected to start the day weaker as Europe's main bourses pushed down as much as 0.6 per cent and investors also offloaded bonds.

The euro gained though, hitting $1.1160 as the dollar retreated after Wednesday's signals the Federal Reserve is not yet confident enough to deliver a long-awaited rate rise.

Euro zone leaders will meet later in Latvia, with Greek premier Alexis Tsipras hoping to secure a broad outline of a cash-for-reforms deal to stave off a default.

But German Finance Minister Wolfgang Schaeuble told Reuters in an interview the Greek government’s optimism about clinching a deal in the coming days was not justified and that he could not rule out it becoming insolvent.

“It is coming to a head,” said Alvin Tan, a currency strategist at Societe Generale in London. “It looks like it will be difficult for Greece to make it through June without a new cash disbursement, so I think we are coming to the point where a deal is needed very soon, probably within the next two weeks.” The dollar drop was its first following a three-day mini-revival and came after minutes from the Federal Reserve’s April meeting showed policymakers had all but ruled out a rate hike in June.

Traders took that as a cue to push back their bets on the timing of the move to the turn of the year.

The European Central Bank, which recently started a ^1 trillion stimulus programme, released the minutes of its most recent meeting, but they provided little fresh insight.

They showed the bank's policymakers were pleased with the progress of its bond buying, but the minutes were from its April meeting, before the recent sell-off in bond markets started.

FRAGILE CHINA

MSCI’s broadest index of Asia-Pacific shares outside Japan ended little changed in Asian trading.

South Korean, Hong Kong and Malaysian shares slipped, while Australian stocks jumped on bargain hunting and emerging Asian currencies took advantage of the softer dollar.

Tokyo’s Nikkei ended almost flat after touching a 15-year high. High-flying Chinese shares climbed another 1.2 per  cent as the third straight monthly contraction in Chinese factory activity bolstered stimulus bets.

“Under the current environment, any excuse seems good enough to cause a rally,” wrote Gerry Alfonso, director of Shenwan Hongyuan Securities Co in Shanghai.

The recent surge in euro zone bond yields has stalled this week, partly in response to ECB policymakers saying the central bank would ramp up its bond buying for the next two months.

German 10-year yields, the benchmark for euro zone borrowing costs, nudged back higher on Thursday though, to 0.65 per cent.