LONDON, Feb 2 - Edgy investors focused on Monday on new economic data and a G7 meeting later this week, with European stocks generally higher, bonds on hold and the battered dollar trading in a tight range. Japanese authorities were again believed to have intervened to stop the yen rising while elsewhere in Asia fears that bird flu virus had passed between humans hit some stocks and wiped two percent off the Hong Kong market. Wall Street looked set to open higher ahead of the Institute of Supply Management's January index of U.S. business activity, due at 1500 GMT. It was keenly awaited after a leap in the Chicago purchasing management index on Friday. European investors were earlier unsurprised by a survey showing the euro zone manufacturing sector grew a little faster in January, even though the euro's strength forced companies to cut jobs to stay competitive. The Eurozone Purchasing Managers' Index rose to 52.5 from 52.4, showing the sector growing at a stronger pace, albeit not as fast as the consensus forecast of 52.9. Job weakness held back the overall index. But market focus was also firmly on the meeting of the Group of Seven industrialised nations on Friday and Saturday. The tumbling dollar has triggered worries about a strong euro and yen stifling nascent economic growth. "It is unlikely that the U.S. would support any market intervention to help weaken the euro," American Express Bank wrote in its weekly outlook. "But there are likely to be some more explicit calls for Asian currency appreciation."
The previous G7 meeting in September called for more currency flexibility, a call the market interpreted as aimed at Asian nations which have intervened to keep their currencies weak alongside the falling dollar. On Monday, the euro was slightly lower at $1.2465 and the dollar lost around a quarter of a percent against the yen to 105.55 yen. Sterling was at $1.8238, effectively flat. The Bank of Japan was suspected of having taken action to hold back the yen.
STOCKS, BONDS
European stocks were higher, buoyed in part by the drug sector. The FTSE Eurotop 300 index <.FTEU3> was up 0.36 percent, close to 17-month highs. The narrower DJ Euro Stoxx 50 index <.STOXX50E> rose 0.52 percent. "We expect economic data flow to continue to improve in the first half, in relation to both industrial production, capex, inventory rebuilding and the labour market," said JP Morgan's global equity strategist Abhijit Chakrabortti. Chakrabortti said he did not expect earnings to disappoint forecasts until the third quarter of 2004, ensuring that markets trade on higher than normal historical multiples meantime. Earlier, caution ahead of the G7 meeting left Japanese stocks little changed. Tokyo's Nikkei stock average <.N225> closed seven points lower at 10,776.73. But fears the deaths of two Vietnamese sisters meant the bird flu virus was now passing between people hit stocks in Hong Kong, Thailand and Taiwan. The euro zone government bond market was drifting with an eye to the G7 Florida meeting and showed little reaction to the manufacturing data. The two-year Schatz yield was down 1.2 basis points at 2.502 percent. The 10-year Bund yield was barely changed at 4.233 percent.//