LONDON: British gilt futures jumped with German Bunds early on Thursday after weak French and Chinese manufacturing surveys and a fall in Japan's exports increased demand for safe haven government debt.
Shares fell after surveys showed manufacturing in France shrank at its fastest pace since April 2009 in September and contracted in China for the 11th month in a row.
Strategists said a fall in Japanese exports for the third month in a row also fuelled appetite for less risky assets such core government debt.
At 0738 GMT, the December gilt future was 38 ticks higher at 119.60, in line with the equivalent Bund future .
"It's all in response to the combination of a disappointing Chinese PMI and a frankly diabolical set of French PMIs," said Marc Ostwald, a strategist at Monument Securities. "We are having the inevitable risk-off check that has been on the cards for quite some time."
Ten-year gilt yields were four basis points lower at 1.801 percent, with their spread over Bunds unchanged from the previous session at 22 basis points.
The domestic focus will be on August retail sales data due for release at 0830 GMT. Unexpected growth in July lifted hopes that consumer spending may help to pull Britain out of its second recession since the financial crisis.
The Confederation of British Industry publishes its September factory orders survey at 1000 GMT. August's balance was the weakest since December 2011.
Monument's Ostwald said the UK data would have to throw up some big surprises to move gilts relative to Bunds and US Treasuries. An auction of 4.5 billion pounds of 2017 gilts later on Thursday should go reasonably smoothly, he added.
Bank of England Governor Mervyn King will give a live television interview later on Thursday. Analysts will scrutinise his comments for clues about further stimulus measures and his views on inflationary pressures.
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