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China trade growth supports shares, dollar weak

Strong trade data from China eased concerns about the global economic outlook on Thursday, supporting European and Asian shares and giving the battered Australian dollar a boost.

The better tone ended three days of steady falls in MSCI's world equity index .MIWD00000PUS caused by expectations the Federal Reserve could soon start to wind down its stimulus program, which has driven this year's rally in stocks.

"A lot of risk assets over the past few weeks have been on a negative trend, and I think a few people are thinking this Chinese data is an opportunity to buy," said Angus Campbell, market analyst at FXPro.

MSCI's broadest index of Asia-Pacific shares outside Japan .MIAPJ0000PUS was up 0.8 percent after the Chinese data, recovering more than half of Wednesday's losses, while Europe's shares .FTEU3 edged up about 0.1 percent in early dealing.

A rise in German exports for June, coming after startling jumps in industry orders and factory output, added to the steadier tone and raised hopes Europe's largest economy could record a bounce in growth.

"Exports are likely to rise more strongly in the second half of the year because euro zone countries such as Italy and Spain will have stabilized, said Alexander Koch, an economist at UniCredit Group.

With the Chinese data raising hopes of better demand for raw materials, the commodities-linked Australian dollar rose 0.9 percent to $.09073 and copper hit its highest in nearly two months

The U.S. dollar languished at a seven-week low against a basket of major currencies as yields on Treasury bonds eased back from highs reached on talk the Fed may begin to trim its bond purchases as early as next month. <FED/>

Investors have been betting the Fed would be well ahead of other central banks in scaling back its easy money policy, but inconclusive economic data and mixed comments from Fed officials in recent weeks mean the timing of the move is still unclear.

The dollar index .DXY dropped to 81.167, bringing its losses to 4 percent in just a month while the euro rose to a seven-week high of $1.3353.

Ten-year German bond yields eased in line with the U.S. Treasury market moves, dipping 2.2 basis points to 1.67 percent.

Traders said news out of Japan was also supportive of euro zone government debt, analysts said.

Japanese investors piled into foreign bonds in July, making their biggest net purchase in three years - early evidence that Prime Minister Shinzo Abe's expansionary policies are having the desired effect.

[Source: By Richard Hubbard, Reuters, London, 08Aug13]

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