Euro jumps ahead of ECB loan repayments

LONDON Fri Jan 25, 2013 9:32am GMT

1 of 9. Traders are pictured at their desks in front of the DAX board at the Frankfurt stock exchange January 4, 2013.

Credit: Reuters/Remote/Joachim Herrmann

LONDON (Reuters) - The euro hit an 11-month high and European shares dipped on Friday as markets braced for news on how much banks will repay of the one trillion euros in European Central Bank crisis funds that have been keeping them afloat.

Data due showing whether Britain is heading for its third recession since the financial crisis began and on German business sentiment was also in the spotlight after upbeat manufacturing reports from the United States and China.

Estimates of the size of the banks' likely repayment of the cheap ECB money average around 100 billion euros according to a Reuters poll, although some analysts believe it could be as high as 300 billion as stronger banks try to show they are weaning themselves off of central bank life support.

"An initial repayment in excess of 100 billion euro would be a positive surprise for markets and likely supportive for risk assets," said Michael Symonds, a credit analyst at Daiwa Capital Markets.

Ahead of the announcement from the ECB due at 1100 GMT, the euro gained 0.3 percent to be above $1.34 to the dollar, its highest level since February last year. Against the yen, the single currency rose 0.5 percent to 121.48 yen, its highest level since April 2011.

In the equity market the broad FTSEurofirst 300 index .FTEU3 index of pan-European shares dipped to 0.1 percent to be just under 1,170 points, near its 22 month high. London's FTSE 100 .FTSE, Paris's CAC-40 .FCHI and Frankfurt's DAX .GDAXI were flat to 0.2 percent higher in early trade. .L.EU.N

Earlier the MSCI's broadest index of Asia-Pacific shares outside Japan .MIAPJ0000PUS eased 0.5 percent, for a weekly drop of about 1 percent, its biggest loss in two months.

The falls came as tech-heavy markets such as South Korea and Taiwan weakened further following disappointing results from Apple this week, but were expected to be contained.

"The PMI indicators from the U.S., Europe and China should serve to keep markets tracking higher," said Tim Waterer, senior trader at CMC Markets in Sydney.

Manufacturing in China and the U.S. grew this month at the quickest pace in about two years, while data suggesting German growth picked up boosted hopes for a swifter euro zone recovery.

Brent crude held above $113, on track to post a second week of gains on the robust economic data, which has improved the outlook for fuel demand in the world's two largest oil consumers.

(Additional reporting by Marc Jones; editing by Philippa Fletcher)