European shares open sharply higher on the back of gains in Asia where the Nikkei surged more than 7 percent despite weak Japanese growth numbers, and talk of a stronger fix of the Chinese yuan eased devaluation concerns. David Pollard reports.
Monday morning on the German stock exchange - but few signs of the back-to-work blues. European shares following a sharp rise on the Nikkei - shares there were up over 7 per cent - with a strong set of buy orders. But the question does have to be asked: why? Latest growth number show Japan's economy shrunk by 1.4 per cent year on year in the last quarter. That's even more than expected. Panmure Gordon's chief economist, Simon French points to a weakening yen currency. (SOUNDBITE) (English) PANMURE GORDON CHIEF ECONOMIST, SIMON FRENCH, SAYING: "The weakness we've seen today is a bet on additional quantitative easing from the BoJ. Governor Kuroda has already made big changes to the structure of quantitative easing and I think markets today and the yen price action is predicated on him increasing and broadening the scope of his monetary stimulus." Bulls on China are beating a different drum. There, talk of a higher official fix for the yuan kept share losses relatively modest. Shrugging off weak data - January exports down 11 per cent year on year, imports down nearly 19 per cent. And a yuan devaluation at some point is still expected by many in the markets. (SOUNDBITE) (English) PANMURE GORDON CHIEF ECONOMIST, SIMON FRENCH, SAYING: "I expect the central bank to deliver that. They have a challenge to do that and still manage the large amount of US dollar-denominated debt held by the Chinese corporate sector, but overall a weaker yuan will be stimulative for the Chinese economy." By mid morning, Europe's bourses were posting gains of two to three per cent. A welcome relief from the recent blood-letting, even if many were asking: how long can it last?