GLOBAL MARKETS-European shares test 2-yr highs, yen volatile before BOJ

Mon Jan 21, 2013 3:30am EST

* European shares up 0.3 pct
    * Dollar dips from 2-1/2-year high vs yen
    * German government bonds dip

    By Marc Jones
    LONDON, Jan 21 (Reuters) - European shares inched towards
two-year highs and German Bund futures dipped on Monday, as a
political attempt to break a budget impasse in the United States
revived appetite for shares and dented appetite for safe-haven
assets.
    U.S. House Republican leaders said on Friday they would seek
to pass a three-month extension of federal borrowing authority
in the coming days to buy time for the Democrat-controlled
Senate to pass a plan to shrink budget deficits. 
   European shares were supported by the news,
but with no clear response from the Democrats and a thin session
expected due to a market holiday in the United States, the
impact on other assets such as Bunds is likely to be limited.
    London's FTSE 100, Paris's CAC-40 and
Frankfurt's DAX opened between 0.4 and 0.5 percent
higher, lifting the pan-European FTSEurofirst 300 0.3 percent
and MSCI's world index 0.1 percent.  
    "There's a bit of encouragement coming out of the U.S.,"
said Toby Campbell-Gray, head of trading at Tavira Securities in
Monaco.
    He added that equity markets had remained resilient in the
face of an uncertain economic outlook as many investors had
stepped in to buy "on the dip" on days when shares had fallen.
    Ahead of the region's first finance ministers' meeting of
the year the euro was steady against the dollar, while
the yen firmed after touching a new low, ahead of a Bank
of Japan decision expected to deliver bold monetary easing.
    The dollar slipped back to a low of 89.42 yen and was last
trading at 89.57 yen, while the euro also fell to a low of
119.08 and last traded at 119.27 yen.
    With little in the way of economic data or debt issuance and
U.S. markets shut for the Martin Luther King Jr. public holiday,
it was expected to be a fairly quite market day.
    Oil prices took their cues from a report in the United
States at the end of last week that showed consumer sentiment at
its weakest in a year as a result of the uncertainty surrounding
the country's debt crisis.
    Concerns about demand overshadowed supply disruption fears
reinforced by the Islamist militant attack and hostage-taking at
a gas plant in Algeria, a member of the Organization of
Petroleum Exporting Countries. 
    U.S. crude futures fell 0.5 percent to $95.08 a
barrel, while Brent fell 0.3 percent to $111.55 early on
Monday but had recovered to almost flat as European trading
gathered pace.
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