GLOBAL MARKETS-Shares, bonds gain as Fed fears fade; gold sinks

Fri Jun 28, 2013 8:56am EDT

* World shares rise as unease over QE withdrawal
    * Dollar rises past 99 yen to 2-1/2-week peak
    * European shares dip, Wall St seen firmer
    * Gold extends fall, hits 3-year lows below $1,200 per ounce
    * Trade seen dominated by end-of-quarter adjustments

    By Richard Hubbard
    LONDON, June 28 (Reuters) - World shares hit their highest
level in a week on Friday and bonds and oil rose, as a volatile
quarter drew to a close with fears of an early withdrawal of
U.S. monetary stimulus waning.
    Better economic data from Japan and efforts by China's
central bank to ease credit concerns added to the positive tone,
lifting MSCI's world equity index 0.5 percent
and putting it on course to snap five weeks of losses.
    U.S. stock index futures were higher as well, pointing to a
firmer start on Wall Street where the benchmark S&P 500 index
 could see its first four-day gain since early April. 
    Market moves were likely to be limited, however, as
investors avoid any large bets on the final trading day of the
second quarter, and ponder the impact of an end to the era of
cheap money which drove returns in the first half of 2013.
    "It's been a tough quarter, the easy game is up and markets
have to revaluate where they stand," said Wouter Sturkenboom,
Investment Strategist at Russell Investments.
 
    Global stock, bond and commodity markets have been highly
volatile since Federal Reserve Chairman Ben Bernanke signalled
last week that the U.S. central bank would soon cut the pace of
its bond buying unless the economic recovery slows.
    Two Fed policymakers came out on Thursday to reassure
investors that any winding down of stimulus was still some way
off, though its ultimate course was set. 
    "The market is going to have to base its views about
equities and currencies on actual economic growth rather than
simply the fact that there's cheap money there," said Simon
Derrick, chief currency strategist at Bank of New York Mellon. 
    "I think that's a fundamental shift."
    A survey of 53 investors across the United States, Europe
and Japan by Reuters, released on Friday, found that funds had
already cut their average equity holdings in June to a
nine-month low due to the recent volatility, and had held more
cash.
    Meanwhile, gold, which had soared in value as a hedge
against higher inflation from all the cheap Fed money, has
suffered heavily. The metal dropped to a three-year low near
$1,200 an ounce on Friday, putting it on course for its
worst quarterly performance in over half a century.

    WINDOW DRESSING
    The end-of-quarter manoeuvring was cited behind a rise in
the euro off a four-week low against the dollar to
$1.3080, and helped the dollar rise against the yen by 0.6
percent at 98.90 yen.
    The broad FTSE Eurofirst 300 index, which had
opened higher in line with other world markets, pared its gains
as end of quarter positioning took hold. It slid 0.5 percent and
was on course to end June lower after a record 12 monthly rises.
    Earlier, MSCI's broadest index of Asia-Pacific shares
outside Japan climbed 1.5 percent, pulling
further away from an 11-month low and wiping out this week's
losses. It was still down around 7 percent for the year.
    Asia's rise followed Wall Street's rally on the Fed comments
and Japanese data showing consumer prices stopped falling in May
and labour demand reached a five-year high. 
    China's stock markets had also seen their biggest gains in
two months after its central bank, which had let short-term
borrowing costs spike to record highs, said it would ensure its
policy supported a slowing economy. 
    European bonds shared in the more positive tone, with yields
falling on core German debt and riskier Spanish 
and Italian paper.
    But Patrick Jacq, European rate strategist at BNP Paribas,
said investors would require higher yields in future in light of
the Fed's policy shift. "Liquidity and credit risk assessment
has changed since the Fed spoke about tapering off," he said. 
    Brent crude oil futures climbed 29 cents to $103.11,
on course for their first monthly rise in five months.
Copper was flat but facing its biggest quarterly loss in almost
two years, reflecting global growth concerns.
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