LONDON: Surging manufacturing growth in Britain drove sterling to a near five-year high as markets suffered only a brief wobble after data on China’s vast manufacturing sector just missed forecasts.

May Day holidays in Europe and much of Asia meant trading was thin, and muted the market impact of the Chinese figures, which followed disappointing US growth a day before.

China’s official manufacturing PMI came in at 50.4 in April, up a tick from March but below forecasts of 50.5, an outcome that failed to ease concerns about the economy but did not point to a deepening slowdown.

A forecast-busting British manufacturing PMI underscored the strength of the economy, which is outperforming major European peers and catapulted sterling to its highest in nearly five years against the dollar.

London’s FTSE climbed 0.3 percent aided by upbeat results from BSkyB and Lloyds bank.

The pound also rose toward a two-month high against the euro, all of which helped underpin the sterling trade-weighted index near a 5-1/2 year high struck earlier this week.

“What more can you say about the UK. We have really had a stellar PMI report, the headline number was much higher than expected and the underlying components were all strong,” said Vasileios Gkionakis, global head of FX strategy at UniCredit.

“We still see the first (Bank of England) rate hike in the final quarter of this year and we see a repricing of interest rate (rise) expectations sooner rather than later.”

The euro also muscled higher, though it did not hold onto all its gains after hitting a three-week high of $1.3889 on expectations that April’s uptick in euro zone inflation will stop the European Central Bank loosening policy soon.

But the ECB may not welcome the market’s renewed affection for the shared currency as it frets about low inflation ahead of its monthly meeting next week.

The combination of market holidays and the start of a new month meant Europe’s money market rates, which underpin the cost of loans to consumers and firms but also impact the euro, remained high despite a flood of extra cash this week.

“It will come down tomorrow,” said one London-based money market trader,

“Though the two day-run (of holidays) mean it probably won’t be as straightforward as usual.”

The dollar got back to its feet after Wednesday data showed bad winter weather dragged on US growth in the first quarter, while upbeat earnings news helped Japanese stocks stage their biggest rally in two weeks.

The Nikkei closed 1.3 percent higher.

There was also better news from South Korea, where exports grew at the fastest annual pace in over a year.

The Australian dollar, often a bellwether for market thinking on China, to which the country is a major exporter of resources, swung repeatedly after Beijing released its PMI before eventually settling at around $0.9273.

Futures prices pointed to fractionally higher starts for all major US indexes when trading resumes, after the Dow’s first record high of the year on Wednesday.

The US economy grew just 0.1 percent annualized in the first quarter, far below already weak forecasts of 1.2 percent, but investors have been willing to give it the benefit of the doubt in expectations of a rebound this quarter.

Economists will have manufacturing PMI and inflation data to digest later on Thursday, while jobless claims figures — the traditional appetizer for Friday’s big payrolls report — are expected to drop to around 319,000.

April non-farm payrolls are forecast to show an increase in jobs of 210,000.

The Federal Reserve ended its policy meeting on Wednesday with a relatively upbeat statement as it pared back bond buying by another $10 billion. Fed chief Janet Yellen was to speak later in Washington.

Markets will watch for any steer on how the US central bank plans to manage the transition to post-crisis policy and eventually higher interest rates. In commodity markets, oil stayed under pressure after stocks of the fuel in the US hit a record high.

Brent crude for June delivery was 0.7 percent lower at $107.34 having shed over a dollar on Wednesday night, while June US crude eased a further to $99.16. Spot gold also fared poorly to stand at $1,28.68 an ounce.