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 An oil price bounce, a weaker dollar and Chinese equity gains
provided some support, but with the U.S. Federal Reserve due to
release minutes of its last meeting and worries over Germany,
investors were wary of extending world shares' six-day rally.
Stock futures indicated a weaker opening on Wall Street, falling
around 0.4 percent.
"Risk-on week continues, but it's not a one-way street," Societe
Generale analysts told clients.
While some beaten-down assets in emerging markets and commodities
could keep rallying, "the weakness in the global economy and
deleveraging process in emerging markets will continue to weigh on
risky markets," they added.
MSCI's all-country equity index was flat after rebounding 7 percent
since last Friday when weak U.S. jobs data pushed back expectations
for the first Fed rate rise in almost a decade into next year.
Doubts about developed world growth reared their head again after
Japan's machinery orders fell in August by 5.7 percent, bucking
expectations of a rise and undermining hopes of an inflation
pick-up.
The data took Japanese stocks around 1 percent lower while the yen
was dampened by expectations the Bank of Japan might have to print
yet more money.
In Europe's growth engine, Germany, exports plunged 5.2 percent in
August for their biggest monthly decline since the height of the
global financial crisis.
A warning by Deutsche Bank of a record pre-tax profit in the third
quarter pushed its shares 2.5 percent lower at one point and the
German share index, already battered by the Volkswagen emissions
scandal, opened half a percent lower before recovering.
The pan-European FTSEEurofirst 300 index also wobbled then clawed
back from initial 0.4 percent falls.
John Plassard, senior equity sales trader at Mirabaud Securities,
said of Deutsche Bank's warning: "We could see more and more big
writedowns hit a sector which thought it was starting to come to
terms with the big restructurings in the wake of the 2008 crisis."
Emerging assets retreated, with MSCI's equity index down 0.6 percent
and most currencies easing against the dollar. Chinese shares,
reopening after a week's holiday, were the exception with 3 percent
gains, playing catch-up with the recent global rally.
On Wall Street too, futures for the S&P 500, Nasdaq and Dow indexes
pointed to losses.
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WEAKNESS
All the data chimes with warnings from international organizations
such as the IMF that have pointed to stalling recovery momentum in
Germany, Britain and United States along with recession in big
emerging markets Russia and Brazil.
Investors will have an opportunity to gauge the thinking of the U.S.
central bank when the minutes of the Fed's September meeting, at
which it opted not to hike rates, are released later in the day.
Fading chances of a near-term lift-off by the Fed and expectations
of a rate hike only in 2016 have taken a toll on the dollar, which
fell against the euro and a broad basket of currencies
The greenback dipped 0.2 percent against the yen, while the euro
rose 0.5 percent and the Australian and Canadian dollars firmed with
the turn in Fed expectations supporting commodity prices.
The European Central Bank too will release minutes: investors are
keen to see if it will hint at extending its trillion euro
bond-buying program.
German 10-year Bund yields fell 4 basis points to 0.56 percent,
holding near five-month lows hit last week.
HSBC predicted 10-year U.S. and German bond yields would fall to
within sight of record lows next year.
"A conventional (Fed and ECB) tightening cycle has become
increasingly unlikely," said HSBC said. "Our lower yield views are
part of an international story, one that sees the ECB stuck in
dovish mode well beyond the end-2016 forecast horizon."
(Additional reporting by Shinichi Saoshiro in Tokyo, Sudip Kar-Gupta
and Marius Zaharia in London; Editing by Ruth Pitchford)
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