Full-throttle car rally drives back trade gloom

LONDON (Reuters) – European shares headed for a third day of earnings on Thursday as a reassuring economic data from Germany and a report that it is important for the United States.

Trade nerves had pegged Asia's purses back with a US to the German market – the spurred Europe's rally and pushed up Wall Street future [.EU][.N]

Daimler Mercedes-maker, BMW Porsche PSHG_P.DE and Volkswagen ( VOWG_p.DE ) The United States of America.

Fueled by a stronger European market in the future.

"With these stories coming out," said Bank of America Merrill Lynch European equity strategist James Barty.

"This is going to be the dominant issue of the summer. Are we heading for a full-blown trade in which case it is very bad news for risk assets, or do we walk away from it, in which case, we are seeing today, markets are likely to rebound quite sharply. 19659005] The euro briefly topped $ 1.17 and bond yields rose after the brighter German data and the ECB thinks markets are now too keen on how to make euro area interest rates next year. [FRX/]

Sterling gained ground too the head of the Bank of England UK rates this year. Later in the day, traders will get the minutes from last month's Federal Reserve meeting when it's raised U.S. rates for a second time this year.

"The euro is getting a bit of a lift on the German data but the trade will continue to dominate the Fed's markets," said Kenneth Broux, a currency strategist at Societe Generale in London.

ASIAN ANGST

The ongoing angst over U.S. President Donald Trump's trade tariffs in the United States.

On Friday, U.S. tariffs on $ 34 billion worth of Chinese imports will take effect. Beijing has promised to retaliate in kind, though it said that it would "absolutely not" fire the first shot in a trade war.

MSCI's broadest index of Asia-Pacific shares outside Japan, which ended 0.25 percent. The index has lost about 2 percent this week, plumbing a nine-month low in the process.

Japan's Nikkei shed 0.8 percent, South Korea's KOSPI slipped 0.4 percent, Hong Kong's Hang Seng was off 0.2 percent and the Shanghai Composite Index fell 0.9 percent to take its dive since late January to 23 percent.

With advancing Europe though, Wall Street's future S & P 500 and Dow and Nasdaq futures were all up 0.6-0.7 percent, pointing to a solid start following Wednesday's U.S. Independence Day holiday. [.N]

"The $ 34 trillion US tariffs figure has been mostly factored into the US $ 16 billion (of a promised $ 50 billion tariff plan)," said Masahiro Ichikawa, Senior Strategist at Sumitomo Mitsui Asset Management in Tokyo.

WEAPONIZE

In currencies, the euro's gain was the dollar's loss. That also helped ease some of the pressure on volatile emerging market currencies, even Turkey's battered will be recovered from an early fall triggered by its prime minister. [EMRG/FRX]

The Chinese yuan was slightly lower though, its recovery from an 11-month low stalling. A rebound was triggered in the past two seasons after the country's central bank.

The longer term direction for the yuan was still unclear. China seems broadly comfortable with a weakening yuan and would like to intervene to prevent market failures, or policy insiders told Reuters.

"Although we do not believe China will weaponize its currency, we do believe the current trajectory of Chinese yuan depreciation is justified," Bank of America Merrill Lynch wrote in a note.

The dollar was 0.1 percent higher against the yen at 110,610 yen, though it was sticking within a narrow range ahead of the Federal Reserve minutes that could give fresh clues on central bank's rate hike plans.

In commodities, Brent oil futures were at $ 78.30 a barrel, a day after U.S. President Donald Trump feels a tweet that OPEC reduce prices for crude.

Iranian oil, and a drop in U.S. crude inventories.

"If Trump continues to believe that we are not doing enough, we would not rule out an SPR (Strategic Petroleum Reserve) release from the U.S., or possibly even export restrictions on petroleum products," ING said in a note.