GLOBAL MARKETS-European shares rebound from lows, euro set for best month in a decade

* Graphic: 2020 asset performance http://tmsnrt.rs/2yaDPgn
* Graphic: World FX rates in 2020 http://tmsnrt.rs/2egbfVh

By Ritvik Carvalho
LONDON, July 31 (Reuters) - European shares recovered from
their lowest levels in a month on Friday, as investors looked
past a severe economic contraction in the euro zone and on to
company earnings, while the euro reached its highest in more
than two years, set for its best month in a decade.
The euro zone's economy recorded its deepest contraction on
record in the second quarter, preliminary estimates showed, but
inflation unexpectedly ticked up in July.
Gross domestic product in the bloc shrank by 12.1% from the
previous quarter, the European Union's statistics office,
Eurostat, said in its flash estimates. The decline coincided
with coronavirus lockdowns, which in many euro zone countries
began to ease only in May. The pan-European STOXX 600 .STOXX rose 0.6%, though it was
on course to end the month flat or lower. Technology shares
.SX8P led the rally, rising over 2% after Wall Street's tech
giants, Apple AAPL.O , Amazon AMZN.O and Facebook FB.O ,
reported forecast-beating results overnight. .EU
MSCI's All Country World Index, which tracks shares across
49 countries, was down 0.04% on the day. .MIWD00000PUS
"Germany's (-10.1%) and France's ( -13.8%) numbers have
already shaped expectations around the magnitude of the 2Q slump
in the aggregated eurozone economy," ING strategists said in a
note to clients.
"Markets will therefore focus on assessing the slowdown in
the Italian and Spanish economies, which were among the first
and worst-hit countries in the pandemic."
They added the euro could hit $1.20 within the next few
days. The single currency passed $1.19 on Friday, though it fell
back below the handle by midday in London. EUR=EBS
The dollar was set for its worst month in a decade against a
basket of currencies, as abysmal economic data for the second
quarter and rising global COVID-19 cases darkened the mood. The
dollar index =USD gained 0.2% on Friday to 93.011 .DXY
FRX/
Expectations the U.S. Federal Reserve will maintain its
ultra-loose monetary policy for years have contributed to a
depressed dollar. U.S. gross domestic product plunged 32.9% in the second
quarter, the biggest decline on record. Jobless claims rose last
week, another sign the economic recovery has slowed.
Those figures overshadowed positive manufacturing data from
China and Japan. China's official Purchasing Manager's Index
data showed that factory activity grew in July for a fifth
straight month and at a faster pace, defying expectations of a
slowdown. Japan's industrial output snapped four months of
declines in June. Earlier in Asia, shares turned lower on Friday amid the
economic data from the United States and rising global COVID-19
cases. After rising in early trade, MSCI's broadest index of
Asian shares outside Japan .MIAPJ0000PUS turned lower. It was
last down 0.3%.
Australian shares .AXJO were down 2.04% and Seoul's Kospi
.KS11 ticked 0.64% lower. Japan's Nikkei .N225 dropped 2.82%
as a stronger yen weighed on exporters. Chinese blue chips .CSI300 were last up 0.35% in a session
that swung repeatedly between gains and losses.
Futures continued to point to a higher open on Wall Street
on Friday. Apple AAPL.O , Amazon AMZN.O , Facebook FB.O and
Alphabet GOOGL.O reported quarterly earnings on the same day
for the first time ever, all topping Wall Street estimates.
"All of them punched the lights out with respect to their
earnings numbers," said National Australia Bank strategist Ray
Attrill.
E-mini futures for the S&P 500 ESc1 rose 0.2% and Nasdaq
futures NQcv1 gained over 1%.
U.S. stock markets, oil prices and the dollar slid on
Thursday as the data underscored the economic impact of the
coronavirus and U.S. President Donald Trump raised the
possibility of delaying the November election.
On Wall Street, the Dow Jones Industrial Average .DJI fell
0.85%, the S&P 500 .SPX lost 0.38% and the Nasdaq Composite
.IXIC added 0.43%.
Crude oil recovered from an overnight slump, with global
benchmark Brent crude LCOc1 rising 0.7% to 43.25 a barrel.
U.S. light crude added 0.5% to $40.21 per barrel. CLc1
Gold also turned higher, with spot gold XAU= trading 0.64%
higher at $1,972.19 per ounce, just short of record highs.
GOL/
U.S. benchmark 10-year Treasury notes US10YT=RR yielded
0.5363%. The two-year yield US2YT=RR touched 0.1152% compared
with a U.S. close of 0.121%.
Italian 10-year bond yields were set for their biggest
monthly drop since January on Friday, boosted by the recovery
fund agreed by the European Union last week. GVD/EUR


<^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^
Emerging markets http://tmsnrt.rs/2ihRugV
^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^>