* Graphic: World FX rates in 2017 tmsnrt.rs/2egbfVh
* European shares at 20-month high after upbeat data,
* Dollar holds gains after Fed downplays slower Q1 growth
* Chances of Fed rate hike in June jump to 72 percent
* Asia stocks lower, after subdued Wall Street
* U.S. House expected to vote on Obamacare repeal bill on
* Oil below $50 on smaller-than-expected U.S. inventory
* Euro climbs as ECB chief economist talks of guidance shift
By Marc Jones
LONDON, May 4 Signs that centrist Emmanuel
Macron was heading for victory in France's presidential election
and buoyant business confidence helped European shares to a near
two-year high on Thursday, despite some wary signals from China
and commodity markets.
Wall Street looked set to open as much as 0.3 percent higher
when it resumes on what will be a packed day of data and
earnings. U.S. President Donald Trump is also set to
make another attempt to get Barack Obama's signature healthcare
law scrapped by Washington.
A poll showing Macron had outperformed far-right candidate
Marine Le Pen in a televised debate had put Europe on the front
foot from the start and sent short-term French bond yields to
their lowest in two months.
Shares then squeezed the accelerator as data showed euro
zone businesses turning out their best performance in six
years, figures that the European Central Bank's top
economist called "comforting". bit.ly/2q1MSQm
Global signals were more mixed however. U.S. worker
productivity unexpectedly fell in the first quarter, leading to
a jump in labour-related costs.
The weakest growth in a year from China's services sector
also 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 Wednesday.
"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 contributed as
Europe's STOXX 600 hit its highest since August 2015.
They 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 benchmarks fell for a third session in four and Brent
was back under $50 a barrel by the time U.S. trading
began as the China services wobble compounded supply data that
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.
"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 following the
Fed's meeting on Wednesday, the dollar index which measures it
against the top six world currencies, steadied just off a
two-week high at 99.132.
It was marginally higher at 112.90 yen but rose as
much as a third of a percent to $0.7394 per Aussie dollar
and 0.2 percent against the New Zealand dollar.
The euro meanwhile drew support from the upbeat data and
Macron's performance ahead of Sunday's French election run-off
to edge back above $1.09.
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 will not be deflected
from its plans to gradually 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 due on Friday,
after separate data showed new applications for U.S. jobless
benefits fell more than expected last week and the number of
Americans on unemployment rolls hit a 17-year low.
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;
Editing by Toby Davis)