GLOBAL MARKETS-German Ifo hits stocks, Carney knocks sterling

Tue Jun 24, 2014 8:26am EDT

By Jamie McGeever
    LONDON, June 24 (Reuters) - European stocks fell on Tuesday
after a survey found German business morale was flagging, while
sterling weakened after Bank of England governor Mark Carney
stirred market doubts about how soon interest rates would rise.
    Germany's Ifo index of business sentiment eased more than
expected in June to its lowest level this year, leading shares
to give up gains they had made on the latest talk of mergers and
acquisition. 
    The FTSEurofirst 300 index of leading shares was down 0.2
percent at 1,385 points, Germany's DAX was down 0.1
percent at 9,912 and France's CAC 40 was up 0.1
percent at 4,520.
    Britain's FTSE 100 was down 0.1 percent at 6,792.
    "You are seeing economic statistics in Europe that are
disappointing," said Francois Savary, chief investment officer
at Swiss bank Reyl. "There is nothing major, but it is time for
a period of some consolidation on the markets."
    Economists at Barclays said the Ifo data and Monday's
surprisingly soft manufacturing PMI figures suggest German
growth in the current cycle has peaked.
    But the downside for shares was limited by renewed talk on
Tuesday of merger and acquisition activity. Agrochemicals
company Syngenta surged as much as 6.5 percent on a
media report that peer Monsanto had considered buying it
in a deal worth $40 billion. Syngenta shares were last up 5.75
percent.
    "Our outlook for equity markets for the remainder of the
year is positive. M&A has made a welcome return in recent
months," said Mark Burgess, chief investment officer at
Threadneedle Investments.
    Earlier in Asia, after a sluggish start most markets across
the region edged ahead and MSCI's broadest index of Asia-Pacific
shares outside Japan rose 0.3 percent. Japan's
Nikkei added a slender 0.05 percent.
    
    CARNEY KNOCKS STERLING
    The biggest mover in currency markets was sterling, which
fell below $1.70 and further back from recent 5-year peaks after
BoE governor Mark Carney told UK lawmakers that there's little
wage or inflationary pressures in the UK economy and that spare
capacity will need to be absorbed before rates rise.
    This appeared to cool expectations that UK interest rates
could be hiked this year, expectations that were fueled by
comments from Carney himself earlier this month.
    "An early rate hike may not be a done deal as yet," said
Valentin Marinov, head of G10 currency strategy at Citi.
    Sterling was last down 0.2 percent at $1.6995, having
earlier fallen more than half a cent to as low as $1.6971.
    The euro was up slightly at $1.3619 and the dollar
was down slightly against the yen at 101.90 yen, leaving
the dollar index down a little at 80.223, well within the
narrow 80.000-81.000 range seen since May.
    There was more life in commodity markets, where oil fell
below $114 a barrel on easing fears over Iraqi supply only to
bounce back sharply with gold's spike.
    Brent crude oil futures were last up 0.2 percent at $114.34
a barrel, and U.S. oil futures were up 0.2
percent at $106.35 a barrel.
    Spot gold rose to its highest in more than two months
at $1,325 an ounce, and is now up around $75 so far this month,
while silver rose to its highest since March above $21 an ounce
.
    "The greenback is slightly weaker today, while European
equities are extending losses from yesterday," said VTB Capital
analyst Andrey Kryuchenkov.
    "Low volumes and technical trading will prevail this week
since there is little else aside form Iraq to drive the market,
with hardly any physical flows at the moment."
    U.S. Treasury bonds rose, pushing the 10-year benchmark
yield down almost two basis points to 2.60 percent. 

 (Reporting by Jamie McGeever, additional reporting by Sudip
Kar-Gupta and Jan Harvey in London; Editing by Ruth Pitchford;
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