European shares steady after heavy falls

World shares were under pressure for a second day today and the dollar slipped against major currencies, in markets beset by doubts over when the US Federal Reserve might slow its stimulus programme.

Top European stocks edged up 0.2 per cent as they steadied after heavy falls yesterday, but another 5 per cent dive in Japan’s Nikkei in Asian trading left MSCI’s world index at a three-week low.

“The market is being dominated by expectations of Fed tightening,” said Daiwa securities economist Tobias Blattner. “German government bond yields have gone up quite significantly and after this massive rally equities are correcting to a certain extent.”

Share gains in Europe were underpinned by mining stocks , which rose 1.8 per cent as traditional safe-haven investment gold - which has fallen sharply this year as demand for riskier assets has risen - jumped more than 1 per cent to a one-week high.

Uncertainty over the timing of any shift left the dollar broadly weaker and hovering near a session low of 100.555 against the yen. The softer greenback saw the euro drift up to $1.2974 as it neared a two-week high.

European Commission sentiment data due this morning will be a focus for investors looking for signs of a pickup following recent patchy surveys.

German Chancellor Angela Merkel and French President Francois Hollande also meet ahead of a June EU summit.

In the debt market, German Bund futures recovered some ground after a recent sell-off. But investors were also reluctant to place big bets before a sale of 5- and 10-year Italian bonds, amid signs that a 10-month fall in peripheral euro zone borrowing costs could be drawing to a close.

Commodity markets were also focused on the uncertain impact a scale-back in Fed support would have on the global economy and its demand for natural resources and for the dollar, which most raw materials are priced in.

London copper dropped to a two-week low of $7,205.50 bringing its fall this year to 9 per cent, and oil dipped back towards $102, near the bottom of its recent range.

Reuters