Europe's resilience trumps another China slump

London - European shares rose on Wednesday after business activity data pointed to steady growth across the continent, contrasting starkly with figures that showed the biggest contraction in China's manufacturing sector since the global financial crisis.

The Chinese purchasing managers index intensified fears that a slowdown in the world's second-largest economy will spread more widely, hitting Asian markets, but those fears were later allayed by the European PMIs.

A recovery in the shares of scandal-hit Volkswagen, which had lost more than a third of their value in the first two days of this week, also spurred the recovery in European shares.

S&P mini futures pointed to a higher open on Wall Street.

"Headwinds from the emerging market turmoil are not derailing the euro zone recovery," said Marco Valli, chief eurozone economist at Unicredit.

"While weakness in world trade is unlikely to be reversed soon - the latest news from China points to a further loss of momentum there - the euro zone continues to benefit from past euro depreciation and the recovery in domestic demand," he said.

At midday in Europe the FTSEuroFirst index of leading 300 European shares was up 0.6% at 1 373 points, Germany's DAX and France's CAC 40 were up 0.7%, and Britain's FTSE 100 was up 1.4%.

Volkswagen AG was in the spotlight again after the company said a scandal over falsified US vehicle emission tests could affect 11 million of its cars around the globe as investigations of its diesel models multiplied, heaping fresh pressure on CEO Martin Winterkorn.

The share price fell as much as 8% early on Wednesday before rebounding to trade 3% higher. It plunged 37% over Monday and on Tuesday.

Asian stocks, however, posted their biggest single-day fall in a month, with MSCI's broadest index of Asia-Pacific shares outside Japan down 2.3%, its biggest daily loss since August 24, according to Thomson Reuters data.

The MSCI world index was down 0.1%, marking the fourth consecutive daily loss.

VW scandal sinks platinum

The preliminary Caixin/Markit China Manufacturing Purchasing Managers' Index (PMI) fell to its worst level since March 2009.

"The decline was driven by a fall in new orders and new export orders. Falling demand both domestically and abroad is only going to make the task of achieving 7% growth that much harder," said Craig Erlam, senior market analyst at Oanda in London.

The Chinese data came after the US central bank refrained from lifting interest rates for the first time in nearly a decade last week, citing concerns that global problems, and China in particular, may hurt the US recovery.

However, the resilience of European stocks cooled overnight demand for safe-haven fixed-income assets.

The benchmark two-year US Treasury yield edged up to 0.7%, and the yield on the 10-year US bond rose 3 basis points to 2.16%.

Yields on benchmark German bonds also rose as much as 3 basis points.

The positive reaction in Europe to the PMIs helped the euro to rise a third of one percent to $1.1160. The dollar was little changed against the yen at ¥120.20.

In emerging markets, Brazil's real languished at a record low against the dollar, having fallen through the 4 per dollar level on Tuesday for the first time ever.. It has now lost around 35% this year.

In commodities US crude futures rose 0.7% to $46.70 per barrel, while Brent futures rose 0.5% firmer to $49.35.

Copper recovered in European trading from near four-week lows overnight in Asia. It was last up 0.5% having earlier posted its biggest one-day drop in more than two months as fund and speculative selling pushed prices down following the Chinese PMI report.

Platinum slid to a fresh six-and-a-half-year low on fears about reduced demand from the auto sector, where it is used in diesel catalysts to clean up exhaust emissions.

It fell to its lowest since January 2009 at $925.30 an ounce, before recouping some losses to trade up 0.3% at $937.20.

The metal has been hurt by news of Volkswagen's falsification of US vehicle emission tests as investors believed it could affect demand for diesel cars.

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