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 News on Tuesday that the Bundesbank is ready to support further
easing steps from the European Central Bank next month if they are
warranted ensured a limited rebound for the euro and an equally
shallow dip in stocks from these peaks.
Sources also told Reuters that a rate cut next month is "more or
less a done deal".
After the sizeable ECB-driven moves across equities, bonds and
currencies on Tuesday, the focus switched to the BoE on Wednesday.
Investors will look to British employment data, the central bank's
quarterly inflation report and comments from governor Mark Carney
for signs on the timing of an expected rise in interest rates, which
some analysts now speculate could come in late 2014 rather than
early next year.
This would likely mean the BoE being the first G4 central bank to
raise rates from the post-recession record lows of virtually zero
across Britain, the United States, euro zone and Japan.
"Governor Carney will try to soothe the market's fears of an
overheating housing market," SocGen analysts said in a note to
clients.
"He is not yet ready to tighten policy," they cautioned.
Still, the contrasting policy bias of the ECB and BoE pushed the
euro to a 16-month low against sterling on Wednesday of 81.23 pence.
The euro regained a footing against the dollar, however, ticking up
0.1 percent to $1.3720. On Tuesday it fell below $1.37, marking a
near 3-cent fall in less than a week.
Britain's FTSE 100 index of leading shares <.FTSE> was down 0.2
percent at 6859 points.
The FTSEurofirst 300 index of leading European shares was down 0.1
percent at 1367 points <.FTEU3>, hovering close to Tuesday's
six-year high. The FTSEurofirst 300 has risen some 7 percent from
lows in March.
Germany's DAX <.GDAXI> was flat on the day at 9752 points. Earlier
on Wednesday it had climbed 0.2 percent to 9,771.40 points, back
within reach of a record high of 9,794 points reached in January.
ITALIAN BOND STRENGTH
Asian shares rose to their highest level in more than a month on
Wednesday after the S&P 500 closed at a record high overnight.
MSCI's broadest index of Asia-Pacific shares outside Japan
<.MIAPJ0000PUS> added 0.8 percent, after earlier hitting its highest
level since April 10.
Hong Kong shares <.HSI> were up more than 1 percent as investors
snapped up property and banking stocks after China's central bank
urged mainland banks to speed up the granting of home loans.
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Japan's Nikkei bucked the trend, slipping about 0.1 percent and
moving away from the previous session's 1-1/2-week high as investors
took profits.
In bond markets, Italian yields held near record lows before the
sale of a longer-dated bond in Rome that is expected to fare well,
after Spain's first inflation-linked bond issue on Tuesday drew bids
of more than 20 billion euros.
Plans for the new Italian 15-year bond issue, to be sold via
syndication, were unveiled late on Tuesday.
"The key theme here is that demand for peripheral paper is very
strong and the Spanish linker showed 70 percent of the issue was
picked up by foreign investors and the Italian syndication should
show a similar trend," said Commerzbank strategist Michael Leister.
Italian 10-year yields were steady at 2.94 percent, not far from the
record low 2.90 percent hit last week, and Spanish 10-year yields
dipped 1 basis point at 2.89 percent with Irish equivalents were
also slightly lower, both heading back towards record lows.
In commodities trading, U.S. crude added about 0.4 percent to
$102.04 a barrel, extending Tuesday's two-week highs hit on
expectations that weekly inventory reports will show record-low
stockpiles.
Spot gold rose half of 1 percent to $1,300 an ounce.
(Additional reporting by Emelia Sithole-Matarise in London and Lisa
Twaronite in Tokyo; Editing by Alison Williams; To read Reuters
Global Investing Blog click on http://blogs.reuters.com/globalinvesting;
for the MacroScope Blog click on http://blogs.reuters.com/macroscope;
for Hedge Fund Blog Hub click on http://blogs.reuters.com/hedgehub)
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