German growth eases pressure on European shares

Surprisingly strong economic growth in Germany eased the selling pressure on shares and commodities on Tuesday, but the political turmoil in Greece, which could lead to its exit from the euro, looked set to keep demand for safe-haven assets strong.

A big rise in exports helped the German economy grow 0.5% in the first three months of the year, well ahead of forecasts, but more data on the wider euro area due later are expected to confirm the rest of the debt-laden region is in recession.

"Germany is faring better than the rest of the euro zone. But I do not believe that it will continue at this speed," said Joerg Kraemer, an economist at Commerzbank.

June Bund futures dipped 14 ticks to 143.26 on the German data, having set new highs of 143.69 the previous day. Ten-year bond yields were 1.5 basis points higher at 1.47%, just above all-time lows of 1.434%.

The common currency stood at USD 1.2860 after having fallen as low as USD 1.2814, its lowest in nearly four months.

European stock markets opened firmer, also helped by the German data and shrugging off weakness in Asian markets, worried about signs of a growing slowdown in China, which left the MSCI world equity index largely unchanged.

The euro zone's blue-chip index, the Euro STOXX 50, rose 0.6% after sinking 2.3% to a near five-month low on Monday.

Market attention will be on meetings between French President-elect Francois Hollande and German Chancellor Merkel in Berlin, and of European Union finance ministers (Ecofin) in Brussels later today, for signs of a shift in the region's pro-austerity policies.

In Athens, Greek Party leaders are expected to convene at 1100 GMT, but there is little hope the latest proposal from President Karolos Papoulias to form a technocrat government would end the political deadlock.