GLOBAL MARKETS-Shares bound higher as Fed meeting nears, dollar firms

Mon Jun 17, 2013 8:58am EDT

* Wall Street set to open higher, focus on Fed meeting
    * European shares jump 1 pct, Nikkei charges up 2.3 pct
    * Dollar recovers vs yen, but hovers near lows against major
currencies
    * Oil pushes up above $106 as Syria standoff looms

    By Marc Jones
    LONDON, June 17 (Reuters) - The dollar edged up against the
yen and euro while European and Asian shares recouped a large
slice of last week's losses on Monday, as investors pinned their
hopes on a cautious tone from the U.S. Federal Reserve this
week.
    Uncertainty over the course of Fed policy has triggered a
broad sell-off in riskier assets over the last month. Investors
are hoping for some clarity on Wednesday when the U.S. central
bank concludes a two-day meeting.
    Markets appeared to be largely putting aside last week's
concerns about a reduction in stimulus and settling on the view
that the Fed will stress its intention to take a cautious
approach to moving down the gears when the time comes.
    Stock futures  pointed to Wall Street opening up
around 0.8 percent, after Asian and European stocks and other
risk assets enjoyed a strong start to the week.
    A 2.7 percent jump in Japan's Nikkei lifted markets
and rises of 0.7 to 1.5 percent in London, Frankfurt and Paris
left European shares up more than 1 percent, making up
more than half of last week's falls.  
    The dollar was also broadly stronger on the view the
Fed will send a reassuring message this week, though it was
starting to flag as U.S. dealing began to gather pace. 
    The jump in the Nikkei had seen the yen fall back to
95 yen to the dollar from a two-month high hit last week, but
profit-taking on the greenback brought the U.S. unit back to
94.74. It also slipped against the euro and was last at $1.3340.
    For analysts, it all pointed to ongoing market volatility.
    "Everyone wants clarity on what is going to happen and when
it is going to happen, but I don't think we are going to get
that because the Fed is not going to box itself in to
something," said Dan Morris, a global macro strategist at JP
Morgan in London.
    "This uncertainty is something the market is just going to
have to get used to... Today the market is back up but does that
mean everything is hunky dory again? I don't think so."
   
    
    DATA    
    Financial markets have always known that the Fed would have
to start withdrawing its stimulus once the U.S. economy was out
of the emergency ward, but Bernanke's comments on May 22 that
the bank might 'take a step down' in the pace of bond purchases
in coming months still came as a shock. 
     The positive side for investors is that it suggests the
global economy is gradually recovering. Data on Monday showed
German wages rose at their fastest pace in almost four years at
the start of 2013 while euro zone exports jumped in April. UK
house prices also picked up. 
    Debt markets, like most others, remained fixated on the
likely longevity of Fed support, but the risk that the euro
zone's troubles could flare up again also remains on peoples'
minds.
    Safe-haven German government bonds had reversed
early losses by midday with traders citing concerns that
tensions in Greece's government could prompt an early election.
    Exactly a year after a general election brought Prime
Minister Antonis Samaras and his two leftist allies to power,
the three parties have fed fears of hugely disruptive snap polls
by refusing to compromise over the closure last week of the
state broadcaster ERT. 
 
    SUPERPOWER STANDOFF 
    Brent crude oil rose above $106 per barrel as a superpower
standoff over the Syrian civil war intensified, raising the risk
of conflict spilling into the Middle East oil-producing region.
    Although Syria is not key to global oil supply, analysts are
worried the turmoil there could drag in other countries and
plunge the region into conflict. 
    The troubles were expected to dominate a meeting of G8
leaders in Northern Ireland.  
    At their first private face-to-face meeting in a year, U.S.
President Barack Obama will try to find common ground with
Russia's Vladimir Putin after angering Russia by authorising
U.S. military support for opponents of Syria's president.
     "Oil is currently being driven primarily by geopolitics,"
said Commerzbank senior oil analyst Carsten Fritsch. 
   "The decision of the United States to supply arms to the
rebels in Syria threatens finally to turn the civil war in Syria
into a proxy war between the world powers, given that Russia is
providing military support to the Assad regime."
A couple walks along the rough surf during sunset at Oahu's North Shore, December 26, 2013. REUTERS/Kevin Lamarque

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