Global Shares Advance as Oil Falls

Reuters

World stocks advanced on Tuesday as falling oil prices and strong Chinese trade data reinforced optimism about the global economy, while Greek debt concerns pushed the euro broadly weaker.

The euro briefly gained against the dollar after a media report that a deal to resolved Greece's debt problems could come as soon as June, but Greece denied it was discussing a new aid package.

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China posted its biggest trade surplus in four months in April as exports hit a record on stronger global demand [ID:nL3E7GA09F], highlighting strength in the world's second largest economy despite its efforts to rein in inflation.

Oil prices fell as the strong Chinese data raised caution the country may extend efforts to cool down the economy and CME, the world's largest commodities exchange, raised the margin call for crude futures for the fourth time since February.

Chinese and U.S. officials are meeting in Washington to thrash out issues including China's grip on the yuan, and the trade surplus number could ignite fresh criticism from U.S. lawmakers.

Optimism over economic recovery after the robust Chinese data lifted the FTSEurofirst 300 index of top European shares 0.5 percent, recouping Monday's 0.4 percent losses.

World stocks as measured by MSCI were up 0.4 percent.

"Markets have been reluctant to give up a lot of ground because there is confidence in a global recovery and confidence that it is turning into a sustainable expansion even if there is some loss of momentum," said Mike Lenhoff, chief strategist at Brewin Dolphin.

GREEK WOES

The euro trimmed earlier gains against the dollar after the Greek government denied a Dow Jones Newswire report that a fresh bailout for the highly-indebted country could come as early as June. It was last 0.1 percent down at $1.4337, having risen as high as $1.4376.

"This seems a bit early to come up with something concrete. I think we'll get more posturing before a deal can be agreed on Greece," said Gavin Friend, currency strategist at nabCapital.

Jitters over a possible second bail-out package for Greece had pushed the single currency down 0.5 percent to $1.4284, nearing a seven-week low of $1.4254 hit the previous day. Against the yen, the euro was at 115.80, its lowest since late March.

The euro's recent fall was accelerated by last week's commodity sell-off and Monday's move by ratings agency Standard & Poor's to cut Greece's rating to B from BB-, dragging it further into junk territory.

But some analysts said the euro was unlikely to fall as sharply as it did a year ago when the Greek debt crisis hit financial markets, because there was now a safety net for indebted countries.

The cost of insuring Greek debt against default and its yield premium over German benchmark Bunds fell after the Dow report though caution limited further advances as traders waited for further detail.

OIL SEE-SAWS

Oil prices fell as the Chinese data spurred expectations of tighter monetary policy, with NYMEX crude for June tumbling as much as $2.21 to $100.32 a barrel, erasing nearly half of a 5 percent rebound on Monday. It was last at $102.00 while Brent crude was marginally lower at $115.75 a barrel, trimming earlier losses of 1.9 percent which pushed it to as low as $113.64.

The oil price fall followed a volatile week of trading that saw U.S. crude prices fall from over $114 a barrel -- the highest level since 2008 -- to $94 a barrel.

The CME's move to make it more expensive for speculators to trade oil futures on margin, while not completely unexpected, added to a sense that a year-long steep climb in commodity prices is on hold for now.

The impact of the margin hike on oil prices may be less severe than on silver, which fell more than 30 percent in late April due to a succession of margin hikes, sparking a sell-off in other commodities.

Spot silver was last bid at $38.08, having slipped to around $37.56.

(Additional reporting by Harpreet Bhal and Neal Armstrong; editing by Stephen Nisbet)