GLOBAL MARKETS-Poor U.S. growth data eases fears of early end to Fed stimulus

Thu Jun 27, 2013 9:05am EDT

* Immediate fears of Fed stimulus withdrawal
    * Precious metals rebound, oil extends gains
    * European shares steady after 3.2 percent bounce
    * Wall Street seen building on recent rebound

    By Marc Jones
    LONDON, June 27 (Reuters) - World shares and bonds steadied
on Thursday while gold and the euro recovered slightly after
disappointing data buoyed hopes the U.S. Federal Reserve may
leave its stimulus programme in place a bit longer previously
expected.
    The market tone improved overnight after a surprisingly
sharp downward revision to first-quarter U.S. economic growth.
While hardly bullish, this calmed immediate fears the Fed would
soon wind down the huge bond-buying scheme that has underpinned
investors' risk appetite.
    Another deluge of U.S. data is due throughout Thursday and
brighter-than-forecast jobless claims and consumer spending
figures released ahead of what was expected to be a third day of
gains on Wall Street left focus on the Fed's stimulus plans.
    European shares had seen their first session of
relative quiet in a week, as they consolidated the 3.2 percent
recovery they have enjoyed over the last two days having dropped
11 percent last week.
    London's FTSE 100 outshone broadly flat markets in
Paris and Frankfurt with a 0.3 percent rise
adding to earlier gains in Asia to nudge MSCI's world share
index to its highest level in a week.
    "Whenever there is good news out of the U.S. it will cause
selling because people see it as a confirmation for Fed tapering
(off bond-buying), while if we have something more disappointing
like yesterday people will say, 'Well OK, it won't happen yet',"
said Tobias Blattner, an economist at Daiwa Securities.
    "That, unfortunately, is the kind of volatility that is
going to continue for the next couple of months."
 
   
    YIELDS YIELD
    With the rise in benchmark 10-year U.S. government debt
appearing to have stabilised at around 2.5 percent, euro zone
bonds from Germany to Greece were able to claw back some of the
ground lost during the recent global selloff. 
    Reflecting the recent rise in yields generally over the last
few weeks, Italy paid its highest rate since March at a 5
billion euro auction of 10- and 5- year debt, but healthy demand
at the sale saw its bonds top the list of periphery performers.
 
    A deal hammered out by European authorities overnight
designed to shift the burden of paying for bank bailouts away
from the taxpayer was also in focus although opinion on the deal
was mixed among economists. 
    New figures from the ECB showed lending to euro zone firms
continued to contract in May, Ireland slipped back into
recession, while France's problems saw its consumer confidence
hit an all time low.  
    But at the same time there was a small pick-up in this
month's European Commission consumer and business confidence
survey, Germany saw unemployment ease and a data revision meant
euro zone neighbour Britain did not suffer a recent "double-dip"
recession after all. 
    "The further marked fall in lending to euro zone businesses
in May maintains pressure on the ECB to come up with concrete
measures aimed at improving credit availability," said Howard
Archer at Global Insight. 
     
    HAMMERED METALS 
    After the sharp moves of recent days, there was some respite
for precious metals, although there were questions over if it
would last.
    Spot gold rose 1 percent to $1,235 an ounce, after a
4 percent fall on Wednesday that took the metal to $1,221.80,
its lowest since August 2010. Silver, which sank 5.5
percent in the previous session, gained about 2 percent.
    Analysts at ABN Amro lowered their end-of-year forecast for
gold $200 to $1,100 and said this year's 25 percent drop in gold
and near 40 percent plunge in silver prices showed "investors
are losing faith in precious metals".
    The easing concerns about a pullback in U.S. stimulus helped
oil climb above $102 and saw the dollar dip which
helped the euro pull up to $1.3035 having dropped to a
three-week low on Wednesday. 
    Steadying Chinese markets, as fears of credit crunch there
eased, also helped calm emerging market currencies and stocks.
    The Indian rupee recovered from record lows as a
lower-than-expected current account gap helped relieve some of
the concerns about the battered currency.
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A tourist takes a plunge as she swims at Ngapali Beach, a popular tourist site, in the Thandwe township of the Rakhine state, October 6, 2013. Picture taken October 6, 2013. REUTERS/Soe Zeya Tun (MYANMAR - Tags: SOCIETY) - RTR3FOI0

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