San Francisco Frontiers - Eurozone stocks sag on strong euro as region exits recession

Frankfurt and Paris stocks retreated but the euro jumped against the dollar, as figures showed the eurozone economy emerged from recession in the first quarter with inflation under control.

London meanwhile zoomed to yet another record peak at 8,195.96 points, with HSBC soaring almost five percent on a bumper stock buyback despite sliding first-quarter profits and the exit of its chief executive.

Eurozone gross domestic product grew by a stronger-than-expected 0.3 percent in the first three months of 2024 compared to the prior quarter, having slid into a shallow recession in the second half of last year, official data showed. Annual inflation held at 2.4 percent in April from the previous month.

The figures are unlikely to stop the European Central Bank from cutting interest rates in June, according to economists.

The US Federal Reserve is predicted to stand pat on rates after meeting on Wednesday, but its statement and boss Jerome Powell's comments will be pored over for clues about the outlook.

- Euro weighs -

"While the ECB is still expected to cut rates in June, what happens after that remains unclear," City Index analyst Fiona Cincotta told AFP.

"Stronger growth and sticky inflation could mean the ECB keeps rates high for longer, which is lifting the euro.

"However, higher borrowing costs for longer are unfavourable for companies, restricting growth, which is why eurozone bourses are heading lower."

In contrast, Asian markets mostly rose Tuesday following advances on Wall Street, while the yen held gains after the previous day's sharp swings and focus turned to the Fed's upcoming policy decision.

A forecast-beating series of earnings from top-tier firms in recent weeks, particularly tech titans including Google owner Alphabet and Microsoft, has been a key driver of the latest advances, offsetting fading hopes for a US interest rate cut this year.

Traders have been lowering their expectations since the start of 2024 for how many reductions the bank will make as inflation continues to hold above target and various indicators show a resilient economy and labour market.

Tokyo stocks piled on more than one percent as it played catch-up with Asia's gains on Monday, which was a Japanese holiday.

The yen weakened slightly but held much of the previous day's surge that observers speculate came on the back of an intervention by authorities after it hit a fresh 34-year low of 160.17 yen per dollar.

Traders are on guard for further yen volatility after the Bank of Japan decided against shifting further from its ultra-loose monetary policy last week and gave little idea about when it would.

- Key figures around 1015 GMT -

London - FTSE 100: UP 0.5 percent at 8,183.48 points

Paris - CAC 40: DOWN 0.2 percent at 8,050.32

Frankfurt - DAX: DOWN 0.4 percent at 18,047.12

EURO STOXX 50: DOWN 0.5 percent at 4,958.12

Tokyo - Nikkei 225: UP 1.2 percent at 38,405.66 (close)

Hong Kong - Hang Seng Index: UP 0.1 percent at 17,763.03 (close)

Shanghai - Composite: DOWN 0.3 percent at 3,104.82 (close)

New York - Nasdaq Composite: UP 0.4 percent at 15,983.08 (close)

Euro/dollar: UP at $1.0734 from $1.0721 on Monday

Dollar/yen: UP at 156.93 yen from 156.35 yen

Pound/dollar: DOWN at $1.2553 from $1.2563

Euro/pound: UP at 85.50 pence from 85.33 pence

Brent North Sea Crude: UP 0.2 percent at $88.53 per barrel

West Texas Intermediate: UP 0.2 percent at $82.81 per barrel

burs-rfj/lth

Z.Phillips--SFF