GLOBAL MARKETS-Asian shares rise, euro steadier but pressure remains

Wed May 14, 2014 2:42am EDT

* Euro steadies close to 5-week lows amid speculation of ECB
steps
    * Sources say Bundesbank ready to support ECB action
    * Disappointing U.S. retail sales report barely dents
sentiment
    * Indonesian shares close to 1-yr high on Jokowi support
news

    By Lisa Twaronite
    TOKYO, May 14 (Reuters) - Asian shares rose to their highest
level in more than a month on Wednesday after the S&P 500 closed
at a record high overnight, with the cheer expected to carry
over into Europe on heightened speculation of more European
Central Bank stimulus next month. 
    Spreadbetters predicted Britain's FTSE 100 to edge
down by 4 points, or 0.1 percent; Germany's DAX was
seen up by 13-15 points, or 0.1 percent; while France's CAC 40
 was seen up by 1 point.
    "We are calling the major bourses firmer with U.S. markets
remaining at record highs," IG strategist Stan Shamu said in a
note to clients.
    MSCI's broadest index of Asia-Pacific shares outside Japan
 added 0.8 percent, after earlier hitting its
highest level since April 10. 
    Hong Kong shares were up more than 1 percent as
investors snapped up property and banking stocks after China's
central bank urged mainland banks to speed up the granting of
home loans.    
    Indonesian shares  rose 0.9 percent to their highest
levels in nearly a year after Jakarta Governor Joko "Jokowi"
Widodo boosted his chances in the July presidential election by
securing the support of the country's second-largest political
party. 
    Japan's Nikkei bucked the trend, slipping about 0.1
percent and moving away from the previous session's 1-1/2-week
high as investors took profits.
    A weaker-than-expected U.S. retail sales report on Tuesday
did little to change views the economy was poised for faster
growth this quarter, and that the Federal Reserve will continue
paring its stimulus. 
    "The U.S. tapering is still going on and it looks like the
U.S. economy is still going strong, meaning people in emerging
Asia are taking a cautious view," said Kyoya Okazawa, head of
global equities and commodity derivatives at BNP Paribas in
Tokyo.
    Investors were also wary of developments in the ongoing
crisis in the Ukraine, where pro-Russian separatists ambushed
Ukrainian troops on Tuesday, killing seven. 
    On Wall Street overnight, U.S. stocks ended flat. The retail
sales figures dented the dollar only slightly and the S&P 500
 managed to eke out its 10th record closing high of the
year after the release.    
    
    EURO FUNDING CARRY TRADES
    In contrast with the Fed's tapering, the likelihood of
easing action increased in the euro zone. The Bundesbank is
ready to support ECB policy steps if they are warranted and this
stance is not new, two Bundesbank sources said on Tuesday.
 
    A weak German ZEW survey of investor sentiment lent credence
to the view that the ECB has reason to take further action next
month. 
    ^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^
    German ZEW graphic: link.reuters.com/cag54s
    ^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^>
    The euro last traded at $1.3717, up about 0.1 percent
on the day, after it dropped as low as $1.3688 on Tuesday. A
break below the April 4 trough of $1.3672 would take the single
currency back to levels not seen since late February.    
    "Euro will remain offered on rallies into the June meeting,"
said Jeffrey Halley, FX trader for Saxo Capital Markets in
Singapore, referring to the ECB's policy meeting next month.
    "It has become the carry trade funding currency of choice,
which has added to the selling pressure," he added, describing
trades in which investors borrow funds in lower-yielding
currencies to purchase higher-yielding assets.
    The pressure on the euro helped support the dollar index
, which was down about 0.1 percent on the day at 80.039,
but remained not far from Tuesday's five-week high of 80.180. 
    Against its Japanese counterpart, the dollar edged down
about 0.1 percent to 102.13 yen, after rising as high as
102.35 yen on Tuesday, its highest since May 2.
    In commodities trading, U.S. crude added about 0.4
percent to $102.04 a barrel, extending Tuesday's two-week highs
hit on expectations that weekly inventory reports will show
record-low stockpiles. 
    Spot gold inched up to $1,294.50 an ounce.   

 (Additional reporting by Masayuki Kitano in Singapore; Editing
by Shri Navaratnam, Eric Meijer and Simon Cameron-Moore)
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