GLOBAL MARKETS-Europe shares, euro rise as German morale brightens

Reuters - UK Focus

* European shares edge up after strong German businessclimate data

* Wall Street seen opening higher

* Slower China house price rise hits Asian shares, yen rises

By Nigel Stephenson

LONDON, Feb. 24 (Reuters) - European stocks rose and theeuro strengthened against the dollar on Monday as a surpriseimprovement in German business morale added to optimism over theeuro zone's recovery, although worries over credit tightening inChina kept investors wary.

In Ukraine, where ousted President Viktor Yanukovich was onthe run and being hunted for "mass murder", the country's dollarbonds rose, debt insurance costs fell and the hryvnia currencyweakened but there was little impact on developed markets.

German Bund futures fell to the day's low after theIfo business climate index in Europe's powerhouse economy roseto 111.3 from 110.6 last month. The euro firmed to $1.3769 but later gave back gains to trade flat to $1.3726.

The German data lifted European shares out of a funk causedby signs of credit restrictions in China's property sector. Butsizeable falls in carmaker Volkswagen (Other OTC: VLKAF - news) 's shares aftera disappointing 2014 outlook and bank HSBC after lowerthan expected 2013 profits, limited gains.

Gold hit its highest in nearly four months on worries overChinese growth and the pace of the U.S. recovery but laterslipped back.

Wall Street looked set for early gains, with futures on the main indexes about 0.1 percent higher.

Earlier, shares in Asia fell and the Japanese yen rose asgrowth in Chinese home prices eased for the first time in 14months - a sign Beijing's campaign to tighten credit conditionsmay be starting to bite.

Asian shares excluding Japan fell 0.4percent and most Asian emerging markets currencies were lower.Tokyo's Nikkei index fell 0.2 percent as the yen, whichis often sought in times of market stress, strengthened.

"Dollar-yen moves on risk aversion, and when Tokyo stocksare down dollar-yen is down, even if the reason is a drop-off inactivity in its (Japan's) major export market," said MarshallGittler, head of global FX strategy at IronFX Global.

In Europe, the FTSEurofirst 300 index of top stocksedged up 0.01 percent. Volkswagen was down 5.8 percent.

"The weak guide for 2014 and the rich bid for Scania (Other OTC: SVKBY - news) willlikely dent sentiment and perpetuate the view that management ismore focused on being big at the expense of shareholderreturns," analysts at Barclays (LSE: BARC.L - news) said in a note.

Spanish government bond yields fell, approaching recenteight-year lows, after Moody's raised Spain's credit rating in afurther endorsement of Madrid's efforts to revive an economyonce at the sharp end of the euro zone debt crisis.

"It's certainly reinforcing positive sentiment in Spain.Moody's has recognised not only the economic recovery but alsothe structural reforms ... and the fact that they're sticking totheir guns on the fiscal deficit," said Nick Stamenkovic, bondstrategist at RIA Capital Markets in Edinburgh.

Spain's 10-year government bond yields lasttraded 0.2 basis points lower at 3.56 percent, lifting off lowsafter final euro zone inflation for January came in higher thanforecast, reducing the likelihood of the European Central Bankeasing monetary policy further.

The yen was last up 0.1 percent at 102.48 to the dollar,which was up 0.1 percent against a basket of currencies.


China shares sank to a two-week low as property and bankingstocks slipped on mainland news reports that stoked fears bankshad stopped extending loans to property-related companies.

"I would get out of interest rate-sensitive sectors. It'svery hard to navigate right now with policy risk on the rise,"said Hong Hao, Hong Kong-based chief equity strategist at Bankof Communication International.

Group of 20 finance ministers and central bankers committedto spurring faster global growth at a two-day meeting in Sydneyover the weekend.

The final communique said the G20 would increase investmentand employment, generating more than $2 trillion in additionaloutput over five years while creating tens of million of newjobs.

Brent crude fell 0.1 percent to $109.78 a barrel.Gold rose to $1,334.50 an ounce, its highest since Oct.31, before retreating to $1,332.60.

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