Reuters: US Dollar Report: GLOBAL MARKETS-Shares fall, Bunds flat amid end-Q1 jostling

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GLOBAL MARKETS-Shares fall, Bunds flat amid end-Q1 jostling Mar 28th 2012, 09:53 Wed Mar 28, 2012 5:53am EDT * European shares reverse down in choppy trade * Markets look to U.S durable goods data post-Bernanke * Euro zone money supply data supportive By Simon Jessop and John Stonestreet LONDON, March 28 (Reuters) - European shares fell on Wednesday while core government bonds steadied, with investors trimming positions before the end of a first quarter that has seen abundant central bank liquidity and better U.S. economic data buoy a range of assets. Such adjustment was also evident in the currency market, where a broad-based rise in the safe-haven yen was accentuated by Japanese exporters' sales of foreign currency before the March 31 end of Japan's fiscal year. With European data thin on the ground, markets turned their focus across the Atlantic, where comments on Tuesday by Federal Reserve chief Ben Bernanke fuelled investor bets on further U.S. monetary stimulus. "The focus remains on growth indicators," said Lauren Rosborough, currency strategist at Societe Generale. "To the extent that Bernanke has raised the ante on U.S. growth indicators, U.S. durable goods orders due for release this afternoon will be the market's focus." The consensus in a Reuters poll is for a 2.0 percent rise in durable goods orders in February, excluding the volatile air and defence components. The pan-European FTSEurofirst 300 index fell 0.4 percent to 1,079.48 in a choppy session driven in part by end-quarter positioning, although it remains on course to chalk up a fourth straight month of gains. Fund managers said the index, which has jumped about 8 percent in the year to date and is on track to record its best first-quarter performance since 1998, could struggle for near-term direction. "The performance of equity markets has been phenomenal this quarter, which makes me believe that upside will be limited in the next few days," Lex van Dam, hedge fund manager at Hampstead Capital, which manages $500 million of assets, said. A rise in euro zone money supply growth and a steadying of loans to the private sector had earlier lent some support. MSCI's main global stock index was also lower, at 335.34, moving further away from its highest point since August of 338.28 hit on Tuesday. DEBT TEST With a sale of medium-term Italian debt the next test of investor demand for peripheral euro zone debt, the German Bund future gave back some early gains to trade flat at 137.26. Italian and Spanish 10-year yields both fell by four basis points, however, to 5.09 percent and 5.37 percent, respectively, as investors positioned for quarter-end. "Italy saw quite a big sell-off yesterday by recent standards," Nick Stamenkovic, strategist at RIA Capital Markets said, adding it could be a correction. "It will be difficult for Italian bonds to rally ahead of the auction tomorrow and while uncertainty persists over the outcome of the labor market reforms which have still to be passed through parliament." Italian six-month borrowing costs fell further towards 1 percent on Wednesday, marking their lowest level since September 2010, as a bill auction drew good demand ahead of Thursday's sale. Italy, whose bonds were the euro zone's weakest performers on Tuesday after an auction of inflation-linked debt, is due to sell five- and 10-year bonds on Thursday. "I think already the impact of the LTRO is beginning to wane," said one trader, referring to the European Central Bank's ultra-cheap three-year loans to banks, which have helped bring down borrowing costs for Italy and Spain this year. "I think we are waiting for the next blow-up ... I think Europe is massively complacent in thinking they have solved everything." Spain and the European Commission denied media reports on Tuesday that Brussels had told the Madrid government to take an EU bailout to refinance the country's troubled banks. YEN RISE The yen rose broadly, helped by seasonal buying from Japanese exporters ahead of the end of their financial year, although rising short positions against the dollar left it open to another squeeze. "Short yen versus the dollar has been the main theme of the quarter and the market seems to have taken it too far heading into the Japanese fiscal year-end," said John Hardy, currency strategist at Saxo Bank. "If you look at US/Japan rate spreads, they are not supportive of where dollar/yen is at the moment," he added. The dollar fell 0.4 percent to 82.85 yen, while the euro eased 0.1 percent to 110.66 yen to inch further away from a 4-1/2 month high of 111.43 hit last week on trading platform EBS. European regional benchmark Brent crude prices fell 1 percent to $124.27 a barrel, on the possibility of a release of strategic oil reserves. A French media report said France was in contact with the United States and the UK over such a release "in a matter of weeks". Copper slipped 0.6 percent to $8,462 a tonne as commodity investors took a cautious stance ahead of the U.S. durable goods data. Link this Share this Digg this Email Reprints

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