Europe shares follow Asia higher on China growth relief

[LONDON] Shares in Europe and Asia rose on Tuesday and the dollar strengthened against the yen after China said its economy had not slowed as much as many in markets had feared.

However, the International Monetary Fund cut its forecast for global growth in 2015 by three-tenths of a percent to 3.5 per cent and called on governments and central banks to pursue accommodative monetary policies and reforms.

Oil prices steadied after an initial dip on prospects of weaker demand in China, the world's second largest economy. But rising hopes for more stimulus from the European Central Bank later this week helped lift stocks around the world.

China's economy grew 7.4 per cent in 2014, just missing official forecasts of 7.5 per cent, its slowest growth in 24 years. But fourth-quarter expansion held steady at 7.3 per cent, down on the previous three months but marginally better than expected. "Growth in the last quarter of 2014 shows some nice resilience, 7.3 per cent versus expectations of 7.2 per cent, which shows that our scenario of a soft landing is quite close to reality," said John Plassard, senior equity sales trader at Mirabaud Securities in Geneva.

A slew of Chinese data, which also showed factory output and retail sales beating forecasts in December, lifted Asian shares.

The Shanghai Composite index rose 1.85 percent and the CSI300 closed up 1.22 per cent. Japan's Nikkei 225 index saw its biggest one-day gain in a month, ending up 2.1 per cent. MSCI's main index for Asian shares, excluding Japan,, was up 0.3 per cent.

European shares rose, also boosted by expectations the ECB would launch as soon as Thursday a programme of money-printing through purchases of government bonds in a bid to fight off deflation and kickstart growth. "I don't think Draghi will disappoint on Thursday. The central bank's credibility is at stake, and this will be a crucial moment for the ECB," said Alain Bokobza, head of strategy, global asset allocation at Societe Generale.

The pan-European FTSEurofirst 300 index was up 0.67 per cent at a seven-year high.

The dollar rose against the safe-haven yen and was last up 0.7 per cent at 118.42 yen, and the euro was all but flat on the day at US$1.1611. In anticipation of looser ECB policy, the euro hit an 11-year low of US$1.1459 on Friday.

Ahead of the ECB meeting, yields on euro zone government bonds have touched a series of record lows. Most yields held near those lows on Tuesday, with the market awaiting a sale of 10-year Spanish debt via syndication.

Indications of investor interest topped 10 billion euros, IFR, a Thomson Reuters news and market analysis service, reported.

In emerging markets, shares measured by MSCI rose 0.4 per cent. The focus was on a central bank policy meeting in Turkey, which was expected to deliver a cut in interest rates amid slowing inflation.

Brent crude oil traded flat, recovering from earlier falls, and was last at US$48.86 a barrel. The benchmark price has lost some 60 percent since June.

Concerns about global economic growth kept gold near a four-month high. Spot gold was last at US$1,291.60 an ounce, pulling back from US$1,294.18, its highest since late August.

REUTERS