May 21, 2012, 06.52 PM | Source: Reuters
MARKETS-GLOBAL:Global shares edge higher but Greek fears linger
LONDON (Reuters) - World shares edged higher and commodities gained on Monday as investors' fears that Greece could leave the euro were partly soothed by promises from China and the Group of Eight leaders at the weekend to support growth.
U.S. stock index futures also pointed to a higher open on Wall Street.
But the gains follow a torrid week, which saw many riskier assets touch their lows for the year, and sentiment is weak with no concrete new plans in place to deal with the problems in Greece or Spain.
"In the next few weeks leading up to the Greek election, there will be plenty of opportunities for people to worry about the European debt situation and the health of the euro in general," Mitsui Precious Metals analyst David Jollie said.
MSCI's world equity index was up 0.15 percent at 298.57, though below where it began the year. Brent crude recovered towards $108 a barrel and copper edged away from four-month lows to be up 0.75 percent to $7,709.75 a tonne.
The FTSE Eurofirst index of top European shares bounced up 0.3 percent to 973.35 points but it had shed 5.1 percent last week to hit its lowest level of the year.
The leaders of the G8 major industrialised nations said they would take steps to combat financial turmoil and revitalise a global economy threatened by Europe's debt crisis, but offered little in the way specific policies to help Greece, which holds fresh elections on June 17.
Investors worry the elections will favour anti-austerity parties, forcing Greece out of the euro and rekindling fears over the impact this will have on the region's banking system and ultimately the global economy.
"If Greece defaults and leaves the currency bloc, containing contagion would prove extremely difficult," JPMorgan Asset Management Market Strategist Joseph Tanious said.
Adding to Europe's woes Spain said while it would meet its deficit targets this year, its 2011 public deficit was higher than previously reported, and it forecast a further contraction of the economy in the second quarter.
Spanish benchmark 10-year bond yields were four basis points higher at 6.31 percent on Monday although the Italian equivalent eased three basis points to 5.94 percent.
But German government bond futures edged lower as investors took profits after Friday's rally.
June Bund futures were 18 ticks lower at 143.46, having risen as high as 144.03 on Friday and posted gains for eight out of the last nine weeks. Ten-year yields were 3.7 basis points higher at 1.46 percent.
EU SUMMIT EYED
Focus in the euro zone markets is now on an informal summit of European Union leaders on Wednesday, at which French President Francois Hollande is expected to promote the idea of mutualising debt, including common bonds.
"The market is getting a bit more optimistic ahead of the EU summit and looking for signs policymakers may announce some policies that will support the system. But they won't be able to solve the crisis in one fell swoop," said Jane Foley, senior currency strategist at Rabobank.
Investors were also considering the impact of a record-breaking German pay deal, which will give millions of workers their biggest rise in wages in two decades, and boosting consumption in Europe's biggest economy.
The euro dipped 0.25 percent to $1.2746, well above Friday's four-month low of $1.2642, which was not far from its lowest point for 2012.
Speculation against the euro reached record levels last week
according to the U.S. Commodity Futures Trading Commission, while their bets in favour of the dollar against other currencies also rose to a high not seen since at least mid-2008.
CHINA PROMOTES GROWTH
Offsetting some of the euro area worries in global share and commodity markets were signs that the world's second largest economy, China, was willing to support measures to boost growth.
"We should continue to implement a proactive fiscal policy and a prudent monetary policy while giving more priority to maintaining growth," Premier Wen Jiabao said in comments reported by state news agency Xinhua on Sunday.
"Remarks from the Premier made during field trips are always in recognition that policymakers have noticed changes in economic fundamentals and are ready to respond," said Yao Wei, a Hong Kong-based economist with Societe Generale.
Wen's comments help lift Asian shares with Japan's Nikkei average inching up 0.3 percent after finishing its seventh straight week of losses on Friday. MSCI's index of Asian shares outside Japan <.MIAPJ0000PUS> also gained 0.5 percent.
Brent crude also rose towards $108 per barrel on Monday, recovering from a 2012 low, on hopes the Chinese premier's announcement could mean strong fuel demand by the world's second largest oil user, although concerns about the euro zone crisis capped gains.
Brent crude gained for the first time in four sessions, adding 74 cents to $107.88 a barrel.
(Additional reporting by Anirban Nag; editing by Anna Willard)