GLOBAL MARKETS-Shares edge up, but set for worst week since June

Fri Apr 19, 2013 8:09am EDT

* Shares rebound but on track for worst week since June
    * Gold, oil, copper off lows but remain vulnerable
    * Yen falls as G20 response to Japan stimulus mild

    By Marc Jones
    LONDON, April 19 (Reuters) - World stocks rebounded on
Friday but remained on course for their worst week in almost a
year after a sell-off triggered by global economic growth
concerns.
    Surprisingly weak Chinese and U.S. economic data, on top of
the International Monetary Fund's decision to trim its global
growth forecast, has hit commodities from gold to oil this week
and brought the recent rally in equity markets to a halt.
    With investors lured back by the recent drop in prices and
sentiment lifted by robust earnings from manufacturing giant and
global conglomerate General Electric, futures prices
pointed to Wall Street breaking its two-day run of falls.
  
    Ahead of the U.S. restart, gains by top European shares
 had extended to 0.8 percent as London's FTSE,
Frankfurt's DAX and the Paris CAC-40 bounced
0.6, 0.5 and 1.3 percent respectively.
    MSCI's world share index, which tracks
around 9000 stocks in 45 countries, was up 0.3 percent, but a
run of heavy losses earlier in the week left it down 2.6 percent
since Monday and facing its heaviest weekly fall since June.
    "The weaker Chinese data has combined with the numbers from
the U.S. and it has been translated by people as that the global
economy is actually at a much weaker stage than has been price
in," said Daiwa Securities economist Tobias Blattner. 
    "I think the correction could continue if we get a snap
election in Italy, but if you ignore the political risk I think
we are going to go into a phase of muddling through where shares
stay roughly where they are, but with a lot of volatility."
    The chance of that sudden Italian election appeared to rise
earlier in the day after Italy's centre-left Democratic Party
(PD) backed former Prime Minister Romano Prodi to become the
country's new president. 
    Differences between the main parties mean his nomination is
likely to snuff out the slim chances of an alliance government
being formed in Rome and lead to re-run of February's
inconclusive election, possibly within weeks.
    Bond investors were unfazed by the uncertainty, however.
Italian government bonds rose slightly, while
German bonds, which have edged higher during this week's sell
off in riskier assets, dipped back 22 ticks to 146.05. 
  
    
    YEN FALLS
    In the currency market, the yen fell back to 99.20 yen to
the dollar after Japan said the Group of 20, which is meeting in
Washington, had accepted that the Bank of Japan's sweeping
monetary expansion is aimed at beating deflation rather than
competitively weakening the yen.
    Finance leaders at the meeting are set to debate specific
targets for reigning in debt levels as well as the potential
dangers from the latest round of aggressive easing of monetary
policy from the world's biggest central banks. 
    In an interview with Reuters as the gathering got underway,
EU Economic and Monetary Affairs Commissioner Olli Rehn said the
euro zone would slow its budgetary belt-tightening to help
reinvigorate economic growth. 
    A number of top countries, including the United States, have
called for this from the bloc and the message helped support the
euro as it climbed 0.3 percent to just below $1.31. 
    The currency has largely held its ground this week despite
comments from the Bundesbank which have bolstered expectations
of a cut in European Central Bank interest rates next month.
    Finland's central bank governor Erkki Liikanen added to the
debate among economists on whether the ECB should go even
further and, like other top advanced economy central banks,
heavily buy bonds and other assets to help boost growth. 
    Asked by a Finnish economic magazine if the bank could use
unconventional means to boost the euro zone economy and step in
to buy corporate bonds, Liikanen said: "One has always to be
ready to explore new options. Our task is to work through money
markets."    

    COMMODITIES MIXED 
    The prospect of lower global growth, and with it weaker
demand for goods used in industrial production, has weighed
particularly heavily on commodity markets this week.
    Investors in U.S.-based funds pulled a record $2.7 billion
out of commodities and precious metals funds over the last week,
Thomson Reuters Lipper data show. 
    Oil Ÿ fell below $100 a barrel for the first time
since July earlier this week. It was 0.8 percent higher at 99.85
as U.S. trading started but like a broad range of commodities
was set for its third drop in as many weeks. 
    Copper, a gauge for manufacturing and China-related
growth, was down 1.5 percent at $6,977 a tonne having broken
below $7,000 for the first time since late 2011 on Thursday.
    But it has been gold that has grabbed many of the headlines.
It suffered its biggest daily drop in dollar terms on record on
Monday as Cyprus's forced plans to sell gold and the recent
shift in funds' behaviour towards the precious metal spooked
investors, but it has since clawed back some of that ground.
    As buyers continued to filter back into the market, spot
gold was holding above $1,400 an ounce but the brutal
sell-off at the start of the week left it heading for a fourth
week of losses. 
    "This (stabilisation) gives us some confidence that as panic
selling passes, prices can rebound by $100-150 an ounce and
trade in the $1,400-$1,550 range over the next 3-6 months," said
Mark Pervan, global head of commodity strategy at ANZ, referring
to a pickup in physical gold sales in India and China.
A couple walks along the rough surf during sunset at Oahu's North Shore, December 26, 2013. REUTERS/Kevin Lamarque

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