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April 29, 2017

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European shares gain, Asia remains lackluster

TOKYO/HONG KONG--European shares rose Wednesday, led by BNP Paribas after the bank said it had enough funds to pay a nearly US$9 billion settlement of charges it violated U.S. trade sanctions. Asian stock markets were lackluster despite an improvement in China's manufacturing.

In early European trading, Britain's FTSE 100 jumped 0.5 percent to 6,774.77. France's CAC 40 added 0.6 percent to 4,447.51 and Germany's DAX rose 0.2 percent to 9,857.72.

BNP Paribas, France's biggest bank, admitted to violating sanctions by processing billions of dollars in illegal transactions on behalf of clients in Sudan, Cuba and Iran that the U.S. had blacklisted to block their participation in the global financial system. The case has weighed on BNP's share price and the resolution, though it involves a massive fine, is a relief for shareholders.

U.S. markets looked set for a positive session, with Dow futures up 0.2 percent and S&P 500 futures also up 0.2 percent.

Asian markets were mixed Tuesday after data showed Chinese manufacturing activity picking up last month, while Tokyo was boosted by a weakening yen.

Tokyo jumped 1.08 percent, or 164.10 points, to finish at 15,326.20 and Shanghai edged up 0.10 percent, or 2.05 points, to 2,050.38.

Sydney dipped 0.37 percent, or 19.85 points, to 5,375.9 and Seoul fell 0.16 percent, or 3.21 points, to 1,999.00.

Hong Kong and Bangkok were closed for public holidays.

The Bank of Japan said its quarterly Tankan survey of business confidence had edged down in April-June — the first dip in 18 months — after consumer spending was hit by a sales tax hike.

The closely watched report, a reading of large manufacturers, fell to plus 12 from plus 17 in the previous three months. It also marks the first decline since Prime Minister Shinzo Abe took office in late 2012.

However, while the study showed weakening business sentiment, traders took heart from data showing firms raised their combined investment plans for the financial year ending March to a 7.4 percent increase, from a previous 0.1 percent rise forecast in the March survey.

"While today's Tankan points to a contraction in GDP of around 0.5 percent ... last quarter, the survey suggests that the recovery will resume in the second half of the year," said Marcel Thieliant of Capital Economics.

In China the official purchasing managers index of manufacturing activity in June came in at 51, slightly higher than May's 50.8, adding to hopes a slowdown in the world's number two economy has bottomed out.

A figure above 50 points to growth while anything below suggests contraction.

A separate PMI by banking giant HSBC hit 50.7, up from 49.4 in May and the first time it has been in positive territory this year, thanks to a series of mini-stimulus measures by Beijing.

"The economy continues to show more signs of recovery, and this momentum will likely continue over the next few months, supported by stronger infrastructure investments," HSBC said. However it warned "there are still downside risks from a slowdown in the property market."

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