LONDON, Aug 6 — European shares and the euro strengthened today on news of a surge in factory output in Britain and Germany, while Australia cut interest rates to ease the strains on its economy.

Wall Street, however, was set for a mixed start, with the main share indices hovering below record highs as investors await clues to whether the Federal Reserve will start to scale back its stimulus soon.

The strong growth at factories in Europe’s largest economy, and in Britain, the euro zone’s biggest trade partner, in June extended a run of recent upbeat data that points to an early end to the currency bloc’s 18-month recession.

Though analysts were quick to stress the region was far from seeing the kind of recovery underway in the United States.

“We think that austerity as well as a financial system that is not willing to lend money to companies will still suppress growth for a longer time,” said Ronald Doeswijk, chief strategist at fund managers Robecco.

The data put Europe’s broad FTSEurofirst 300 index on course for a seventh straight day of gains as it rose 0.2 per cent, although the UK’s FTSE 100 index ended the morning session slightly easier, down 0.1 per cent.

In the currency markets both the British pound and the euro reversed early weakness to gain on the dollar after the data, with sterling settling little changed at US$1.5350 and the single currency edging up 0.15 per cent to US$1.3280.

Germany said industrial orders at its factories surged by a surprisingly strong 3.8 per cent in June, their largest monthly rise since October as contracts for big-ticket items jumped and euro zone demand rebounded.

The German share price index DAX board at the Frankfurt stock exchange August 6, 2013. — Reuters pic

Britain’s manufacturers reported their biggest annual rise in overall industrial production for over two years, adding to growth already seen in service-sector activity, the housing market and in retail sales.

“The broad-based improvement seems to suggest that the current improvement in activity has good foundations and further progress is likely in the coming months,” Annalisa Piazza, a senior economist at Newedge Strategy, said.

Italy’s economy shrank by less than expected in the second quarter, adding to recent signs its slowdown is bottoming out.

German government bond prices eased after the data, sending 10-year Bund yields to 1.7 per cent while equivalent Italian bond yields fell 4.5 basis points to 4.25 per cent.

The better tone in European equities bucked an earlier trend in Asia where MSCI’s Asia-Pacific ex-Japan index fell 0.5 per cent to hit a two-week low and post the first loss in four days.

However, stocks in Tokyo had ended up 1 per cent after Reuters reported that a massive Japanese pension fund for government workers was considering increasing its allocation mix to buy more stocks.

Australia cuts

The main focus of the Asian session was the Reserve Bank of Australia’s decision to cut interest rates by 25 basis points to a record low 2.5 per cent, and refrain from any guidance on further policy moves.

The move had been widely expected and some traders were disappointed by the absence of any statement on more rate cuts, leaving the local dollar up some 0.6 per cent against the greenback at US$0.8982.

“The bounce in the Aussie is unlikely to last,” said Neil Mellor, currency strategist at Bank of New York Mellon. “The RBA has said it expects a further decline in the currency.”

In commodity markets, copper added 1.1 per cent to around US$7,056 a tonne, helped by a weaker dollar, while encouraging economic data from both sides of the Atlantic in the past two days helped push gold down 1.2 per cent. It extended a 0.6 per cent drop in the previous session and was not far from a two-week low of US$1,282.69 hit on Friday.

Brent crude prices recovered to trade above US$109 a barrel on rising Middle East tension after the United States told US citizens to leave Yemen immediately. It was on course to snap two days of losses. — Reuters