* Graphic: World FX rates in 2017 tmsnrt.rs/2egbfVh
* Dollar holds gains after Fed downplays slower Q1 growth
* Chances of Fed rate hike in June jump to 72 percent
* European markets at 20 month high
* Asia stocks lower, after subdued Wall Street, Europe
* U.S. House expected to vote on Obamacare repeal bill on
* • Oil slips on smaller-than-expected U.S. inventory
By Marc Jones
LONDON, May 4 Signs that centrist Emmanuel
Macron was heading for victory in France's presidential election
and reassuring results from HSBC pushed European shares to a
near two-year high on Thursday, despite some wary signals from
China and commodity markets.
A poll showing Macron had outperformed far-right candidate
Marine Le Pen in a televised debate sent short-term French bond
yields to their lowest in five months, with encouraging euro
zone data also helping the mood.
Global signals were more mixed however. The weakest growth
in a year from China's services sector added to the
pressure on oversupplied oil and metals markets that have began
to buckle again in recent weeks.
Those strains were exacerbated too by a stronger dollar
after the Federal Reserve had downplayed the somewhat soft start
to the year for the U.S. economy at its latest meeting on
"There are a number of things playing out at the moment.
Traditionally in May there is a strong dollar effect and that is
adding to the pressure on the commodity bloc," said Unicredit's
head of FX Strategy Vasileios Gkionakis.
"In Europe it is slightly different. There is what is going
on with the French election and we have been seeing some strong
A flurry of well-received earnings updates in Europe sent
the STOXX 600 to its highest since August 2015 and
included a smaller-than-feared fall in bank giant HSBC's profits
which sent its shares up more than 3 percent.
Oil and gas stocks were also up 1.1 percent
following robust updates from both Statoil and Royal
Dutch Shell, which rose 3 percent and 2.3 percent
It is was a different situation in the physical commodity
Oil fell for a third session in four to leave it near its
lowest since late March at $50.50 after the China
services wobble and supply data had shown a smaller than
expected decline in U.S. inventories.
Bellwether industrial metal copper was also teetering near a
four month low on what traders said was China-based selling and
on expectations that two U.S. rate rises this year could curb
interest in dollar-denominated metals.
"Later today there is a mass of U.S. data including key
employment numbers, durable goods and factory orders and if
these also fall below expectations it would be reasonable to
expect another wave of selling," Kingdom Futures said in a note.
GOING FOR A HIKE
After the dollar had risen across the board after the Fed's
meeting on Wednesday, the dollar index which measures it against
the top six world currencies, was up another 0.2 percent
on the day at a two-week high of 99.462.
It was marginally higher at 112.80 yen but more
than a third of a percent stronger at $0.7394 per Aussie dollar
and 0.2 percent higher against the New Zealand dollar.
The euro meanwhile drew some support from Macron's
performance ahead of Sunday's election run-off, and was barely
budged at $1.0876.
World markets have been assuming a Macron win since the
first round of votes last month and so there is only a little
juice left in any relief rallies come Sunday evening.
That said, European equity markets have been outperforming
Wall Street this week as the latter stumbled on Apple’s iPhone
hiccup and Wednesday's signs that the Fed won’t be deflected its
plans to gradual raise U.S. interest rates.
At the end of its two-day meeting, the Fed kept its
benchmark interest rate steady, as expected, but downplayed weak
first-quarter economic growth and emphasised the strength of the
labour market, a sign it was still on track for two more rate
increases this year.
Futures traders are now pricing in a 72 percent chance of a
June rate hike, from 63 percent before the Fed's statement,
according to the CME Group's FedWatch Tool.
Attention now turns to U.S. non-farm payrolls for March, due
on Friday, after separate data showed private employers added
177,000 jobs in April. That was higher than expected but the
smallest increase since October.
Economists polled by Reuters expect U.S. private payroll
employment likely grew by 185,000 jobs in April, up from 89,000
(Additional reporting by Nichola Saminather in Singapore)