Auto stocks help Europe drive higher, shrug off Japan-led Asia losses

European shares pushed higher Monday in holiday-thinned trading with shares in car manufacturers leading the way, despite a sharp drop in Tokyo as a surging yen hit exporters.

"European equities are trading mostly higher in afternoon action, though volume is lighter than usual with U.K. markets closed for a holiday," said market analysts at Charles Schwab.

Germany's DAX 30 ended the day up 0.8 percent, while France's CAC 40 rose 0.3 percent.

"Automakers are moving higher to help buoy the markets, aided by upbeat comments from Fiat Chrysler Automobiles NV's Chairman (Sergio Marchionne) on the outlook for China," said a note from the brokerage house.

Fiat shares got a bump early on, but ended the day down 0.5 percent in Milan.

However in Germany shares in Mercedes-maker Daimler rose 0.7 percent and BMW climbed 0.8 percent, with VW managing a 0.2 percent gain.

"However, Italian banking stocks are hamstringing the financial sector after a disappointing banking stock initial public offering (IPO) in the nation," said Charles Schwab analysts.

Milan closed down 1.0 percent after investors were not seduced by an initial public offering by Banca Popolare di Vicenza, hitting other banking shares, including sector leaders Unicredit, which fell by 6.9 percent and Intesa Sanpaolo, which shed 3.4 percent.

Wall Street was also higher approaching midday despite a key manufacturing report issued Monday showed the sector slowed much more than expected in April. The Institute for Supply Management's manufacturing PMI index fell to 50.8 from 51.8 in March, nearing the no-growth level.

The report kicked off of a week of heavy of big US economic data releases that includes April jobs and car sales data.

After the ISM report the dollar fell against the euro.

"The euro-dollar rate crossed a major technical level of $1.15 which opens up the possibility for a much higher increase," said analyst Sylvain Loganadin at FXCM brokerage.

"In effect, traders are positioning themselves for the publication of disappointing US non-farm payrolls data on Friday," he added.

Data released last week showed growth in the US economy had unexpectedly slowed to a 0.5 percent annual rate in the first quarter of this year.

- Tokyo tumbles -

Tokyo stocks plunged more than three percent leading a sell-off across Asia, also in limited holiday trades, after the Bank of Japan surprised markets by opting Thursday not to unleash fresh stimulus despite signs of faltering growth.

After Friday's public holiday in Japan, the Nikkei closed 3.1 percent lower Monday, playing catch up with sharp losses on Wall Street on Friday.

"We expect short-term share market volatility to remain high," Shane Oliver, the Sydney-based head of investment strategy AMP Capital Investors, told Bloomberg News.

"Failure by the BoJ to do more soon risks unwinding all the progress on inflation expectations seen under Abenomics, particularly with the yen breaking to ever higher levels," he added, referring to Prime Minister Shinzo Abe's growth policy blitz.

The yen has soared against the dollar since the BoJ decision, which came soon after the US Federal Reserve indicated it was keeping its eye on market movements before hiking interest rates again.

And it remains elevated despite Japan Finance Minister Taro Aso trying to talk it down by hinting at possible intervention if its strength continues.

On Saturday he said the rally was "extremely worrying", adding that "speculative moves are seen behind it".

"Tokyo will continue watching the market trends carefully and take actions when necessary," he said.

The greenback bought 106.51 yen Monday, well down from the levels above 111 yen before the BoJ's surprise announcement.

- Key figures around 1530 GMT -

Frankfurt - DAX 30: UP 0.8 percent at points 10,123.27 (close)

Paris - CAC 40: UP 0.3 percent at 4,442.75 (close)

London - FTSE 100: Closed for public holiday

New York - Dow: UP 0.4 percent at 17,840.14

New York - S&P 500: UP 0.4 percent at 2,073.29

New York - Nasdaq: UP 0.1 percent at 4,781.86

Tokyo - Nikkei 225: DOWN 3.1 percent at 16,147.38 (close)

Hong Kong - Closed for public holiday

Shanghai - Closed for public holiday

Euro/dollar: UP at $1.1515 from $1.1452 Friday

Dollar/yen: UP at 106.51 yen from 106.31 yen