GLOBAL MARKETS-Shares hold steady after Fed stimulus boost

Fri Sep 20, 2013 11:24am EDT

* World shares steady at five-year high, dollar inches off
lows
    * Wall Street little changed but still on track for strong
week
    * Euro near 7-1/2-month high vs dlr but cautious ahead of
German vote
    * Indian markets roiled by surprise rate hike by central
bank


    By Ryan Vlastelica
    NEW YORK, Sept 20 (Reuters) - World share indexes were
little changed on Friday, consolidating after a week of major
gains that took them to record levels after the Federal Reserve
unexpectedly decided to maintain its stimulus program.
    Currencies and bonds were mostly unchanged on the day, while
gold prices dropped and Brent crude rose.
    After the sharp moves of Wednesday and Thursday, equity
trading was subdued as investors took stock of their positions
and locked in some of the gains. Investors also looked ahead to
German elections on Sunday.
    European shares dipped 0.2 percent while the euro
 was holding near an eight-month high after its best week
since July. MSCI's index of world shares fell
0.3 percent but was on track for its third straight week of 2
percent plus gains and hovered near a five-year high. Japanese
stocks slipped 0.2 percent.
    Although the Fed's move has spurred market gains, taking
U.S. indexes to all-time highs, uncertainty over central bank
policy remained. In an interview on Bloomberg TV, St. Louis
Federal Reserve Bank President James Bullard said a wind-down of
the stimulus program was possible in October.
    "We're cautioning our clients to keep their powder dry.
While markets aren't historically overbought and the Fed has
removed some uncertainty, we wouldn't be surprised if we saw
some kind of correction going into October," said Mark Martiak,
senior wealth strategist at Premier Wealth/First Allied
Securities in New York.
    The Dow Jones industrial average was down 25.78
points, or 0.16 percent, at 15,610.77. The Standard & Poor's 500
Index was down 1.16 points, or 0.07 percent, at 1,721.18.
The Nasdaq Composite Index was up 6.86 points, or 0.18
percent, at 3,796.24. For the week, the S&P is up 2 percent.
    The U.S. dollar index rose less than 0.1 percent,
holding above its week lows against a basket of major currencies
having found support after a string of upbeat U.S. data on
Thursday. 
    Analysts at BNP Paribas said they expected the greenback to
"recover quickly versus the lower yielding currencies in the
G10." Fadi Zaher, head of bonds and currencies at Kleinwort
Benson, said they were also betting on dollar gains.After taking a battering in May and June on prospects of
reduced stimulus, emerging market currencies and stocks were
some of the biggest winners from Wednesday's Fed move. 
    Indian financial markets were roiled again on Friday,
however, after the Reserve Bank of India unexpectedly raised
interest rates by 25 basis points. 
    The Indian rupee fell 0.7 percent to 62.23 to the
dollar while Indian shares fell almost 2 percent. 
        
    GERMAN ELECTION CALM
    Thursday's brighter U.S. data, which included a surge in
home sales and some encouraging unemployment claims figures,
provided a timely reminder that a scaling back of stimulus will
come eventually, despite this week's delay.
    The benchmark 10-year U.S. Treasury note was
down 2/32, with the yield at 2.7594 percent. Benchmark 10-year
German government bonds were also stable at 1.901 percent
 after yields - which move inversely to prices -
sank to a one-month low of 1.812 percent on Thursday. 
    The euro and the bloc's shares and higher yielding bonds
have been supported by recent signs of economic recovery, but
some market players are getting nervous before Sunday's German
election.
    Though Chancellor Angela Merkel is likely to win a third
term her lead has narrowed in recent opinion polls. A new
eurosceptic party, Alternative for Germany, could make headway
in parliament, which might rattle some investors.
 
    "If the party gets 5-to-6 percent of the vote, people will
start gauging the risk of Germany leaving the euro. That would
be negative for the euro zone," said Arihiro Nagata, head of
foreign bond trading at Sumitomo Mitsui Banking Corp.
    In the commodities market, Brent crude oil rose 0.5
percent to $109.32 per barrel, rebounding after a 1.5 percent
drop the previous day on increased Libyan production and signs
of a thawing of diplomatic relations between Iran and the West.
 
    Meanwhile, gold, whose reputation as an inflation
hedge means it usually benefits from central bank stimulus, fell
1.6 percent, though it remains on track for its best week in
five.