Global shares rise as investors look to new quarter, U.S. growth

By Richard Hubbard

LONDON (Reuters) - Shares rose on Monday as investors edged back into riskier assets at the start of a new quarter, pinning their hopes on a U.S. economic recovery and brushing off signs of a slowdown in China.
MSCI's world equity index <.miwd00000pus> rose 0.3 percent by mid-morning in Europe, having finished a volatile three months to June with its first loss since the same period of 2012.
Emerging market stocks (.MSCIEF) touched a 12-day high, having risen more than 4 percent last week after six straight losing weeks on concerns the planned withdrawal of U.S. monetary stimulus will send funds flowing back to developed markets.
Evidence of a slowdown in China's factories had little effect on sentiment despite pointing to weakness in the world's No.2 economy, with markets focused more closely on U.S. prospects.
Investors are highly sensitive to data from across the Atlantic because it will shape when the Federal Reserve begins tapering its $85-billion-a-month asset purchase program.
A report on manufacturing activity likely to show an improvement in June is the next milestone, with Friday's June jobs report, which comes a day after the Independence Day holiday, seen as critical to the market's next direction.
"Moderate payroll growth is probably enough now to keep unemployment ticking down and with that pace you'll get (Fed) tapering starting in September," said Nick Beecroft, senior market analyst at Saxo Capital Markets.
A strong jobs report could fan speculation about an early end to the stimulus, lifting both bond yields and the dollar at the expense of many emerging markets and commodity markets.
"It could be a pretty hairy end to the week. Markets will be pretty whippy and thin on Friday," Beecroft said.
DOLLAR BUOYED
An anticipated end to Fed bond buying supported the dollar near a four-week peak against a basket of currencies (.DXY). It rose 0.45 percent against the yen to 99.57 yen.
The euro, however, was up 0.3 percent at $1.3040 after a survey showed manufacturing in the euro zone stabilized in June.
"Both output and new orders barely fell during June, and on this trajectory a return to growth for the sector is on the cards for the third quarter," said Chris Williamson, chief economist at the survey's compiler Markit.
Traders also looked ahead to Thursday's policy meeting of the European Central Bank - which in contrast to the Fed is likely to emphasize a commitment to keeping policy loose.
"We expect the ECB to continue emphasizing that extraordinary accommodative policies will continue, and that it has other options if looser monetary policy is needed," said analysts at RBC Capital Markets.
The PMI manufacturing survey eased pressure on the ECB to do more, while hopeful individual country surveys helped Spanish 10-year bond yields dip 7 basis points and Italy's equivalent drop 5 bps.
Core German bond prices fell further after posting a second month of losses in June, with cash 10-year yields up 2 bps at 1.75 percent in edgy trading before the U.S. manufacturing data due at 1400 GMT.
After Europe's PMI data, the broad FTSEurofirst 300 index (.FTEU3) was flat as investors considered their next move following the index's worst quarterly performance in a year.
In commodity markets, renewed demand for copper lifted the metal by 2 percent though it remained near three-year lows as the Chinese data underlined sluggish prospects for metals.
Brent crude edged higher too, closing in on $103 a barrel.
(Editing by John Stonestreet)