European stock markets bounced back from their worst week since early February with a more than 1 percent gain on Monday, a rise in oil prices and strong economic numbers from Germany outweighing worries over China.
The dollar, struggling since a disappointing set of U.S. jobs numbers on Friday, jumped to its highest in 10 days against the yen after Japan’s finance minister said outright that Tokyo was ready to intervene if currency moves hurt the economy.
But with the yen always tending to suffer when investors expectations on growth rise, the move also looked as much the result of the broader optimism generated by the move in oil and the biggest rise in German industrial orders in nine months.
U.S. futures showed Wall Street was also set to gain around a quarter of a percent on opening. 1YMc1 ESc1 The pan-European FTSE 300 index .FTEU3, Germany’s DAX .GDAXIand France’s CAC .FCHI all rose by more than 1 percent.
“There’s a general improvement in risk sentiment, on the back of the higher oil price,” said Hantec Markets’ analyst Richard Perry.
“Safe-havens such as the Yen and gold are coming under pressure, and that is filtering through to push up equities.”
Still, the mood was not uniformly rosy.
Shanghai’s stock market .SSEC sank almost 3 percent after worse-than-expected Chinese trade numbers, which added to the more general doubts about the pace of global growth and the likelihood of rises in interest rates generated by Friday’s U.S. jobs data.
And after gaining almost 2 percent in early trade in Europe, Brent and U.S. crude prices saw gains pared back. LCOc1 CLc1
An almost 15 percent surge for the yen has been the big currency story of the past six months and traders remain skeptical over the chances of Tokyo making good on repeated threats to counter the move in the absence of global support.
Japan is the developed world’s most consistent interventionist on markets over the past two decades as it strives to find a way out of a cycle of low growth and low inflation.
But previous bouts of yen selling have tended to come with at least tacit blessing of its international partners and this time Washington seems opposed.
“Finance Minister Aso stated strongly that sudden yen strength or weakness is bad and that Japan has the means to intervene,” said Lee Hardman, a currency analyst with Bank of Tokyo-Mitsubishi UFJ in London.
“He also attempted to alter market expectations that US opposition will prevent Japan from intervening. Overall, the comments do not significantly change our view that direct intervention to dampen yen strength remains unlikely in the near-term.”
The dollar, which hit an 18-month low against the yen last week JPY=, was up 1.1 percent by midday in London at 107.60 yen. That is still down from 123 yen last December.
The recovery in the value of crude this year has tended to be a positive for stock markets, encouraging hopes that consumer prices will also start rising again, easing the burden of debts weighing on companies and governments and allowing more investment.
Against that is the impact on oil companies’ operations of shutdowns caused by wildfires in Canada which have hampered production. Dealers said that European-listed oil majors were shielded by the impact being chiefly on Canadian operations.