European shares rise on solid earnings reports and another set of strong PMI numbers out of the euro zone. But as David Pollard reports, Asian shares got a shock when China unexpectedly hiked rates.
UPSOT (Mandarin) CHINESE FOREIGN MINISTRY SPOKESMAN LU KANG SAYING: "China has never and won't use a currency war....." It's official - China doesn't do currency wars. The foreign ministry denying US claims it uses devaluation as an economic weapon. As if on cue, the Chinese yuan firmed against the dollar. A shock hike in short-term rates by the People's Bank of China likely to add to the greenback's momentum. (SOUNDBITE) (English) INDEPENDENT MARKET ANALYST, JEREMY BATSTONE-CARR, SAYING: "The knee-jerk reaction from investors is 'oh my goodness me, is this going to impact on Chinese growth' ... But of course in strengthening the yuan, what you are also doing is potentially raising questions over the sustainability of demand for raw materials, and I think it's that that's tended to spook investors." The 10 basis points move did drive Asian shares down - and Chinese stocks to their worst losses in weeks. Though Europe gained - on strong corporate results. Trading, this time, not overshadowed by the global concerns that have dominated. (SOUNDBITE) (German) ROBERT HALVER, SAYING: "We don't yet have a clear view what Trump is doing, either with regards to trade or geopolitically ...." Services data added to the mood. Germany's easing back slightly - but France at a five-year high. And the composite PMI reading also at its best in over half a decade. Even as worries persist over the economy as a whole. (SOUNDBITE) (English) INDEPENDENT MARKET ANALYST, JEREMY BATSTONE-CARR, SAYING: "Whilst the PMI surveys may imply that everything is fine and dandy, the cyclical data indicates that the region is suffering really very severely." And for the first time in four months, UK services PMI were down. Sterling dropping nearly half a per cent on a surprise dip that reawakens concerns over Brexit.