* European shares dip in jittery trade before Fed statement
* Dollar steadies against major currencies, weaker vs yen
* Oil holds around $106 a barrel, gold flat
* German Bunds firm as debt auction eyed
By Richard Hubbard
LONDON, June 19 European shares turned lower but
major currencies and commodities stuck within recent ranges on
Wednesday as investors awaited clarity on the U.S. Federal
Reserve's next policy move.
Mixed reports on the strength of the U.S. economic recovery
are expected to encourage the Fed to leave its ultra-loose
policy unchanged, but concern it may hint at when it will wind
back its bond buying is making all markets skittish.
"The market is very nervous," said Oliver Roth, head trader
at Close Brothers Seydler.
"For investors, I would say that they should be careful and
set their limits - especially stop limits - very carefully,
because if there is some change coming up for the Fed policy
then there could be a dramatic drop for the market," he said.
The policy setting Federal Open Market Committee will
announce its decision at 1800 GMT, followed 30 minutes later by
a news conference with Fed Chairman Ben Bernanke.
Expectations for a scaling back of the Fed's massive bond
buying programme has supported the dollar, especially against
emerging market currencies, though uncertainty over the impact
of any policy shift has led some investors to prefer the yen.
It shed 0.4 percent to under 95 yen on Wednesday,
although the dollar was steady against the euro at around $1.34
after the single currency touched a four-month high on
Against a basket of major currencies the greenback
was flat at around 80.50.
"The general elements for a stronger dollar are in place, on
the back of the prospect of tighter U.S. monetary policies.
Maybe it will get another shot in the arm (from the Fed), may be
it won't, but rushing to judgement is probably going to be a
mistake," said Ned Rumpeltin, head of G10 FX strategy at
Standard Chartered Bank.
Trading was choppier in equity markets as investors have
seen strong gains this year on the back of the liquidity
injections from major central banks.
Europe's broad FTSEurofirst 300 index gave up
earlier gains to dip 0.25 percent, tracking a softer session in
Asia outside Japan, where mainland Chinese
stocks were hit by dampened hopes for a local policy easing.
"The Fed's tone will clearly influence the action. If
Bernanke indicates that tapering is quite a bit of a distance
off, investors will feel relieved and equities can revisit their
recent highs," Philippe Gijsels, head of research at BNP Paribas
Fortis Global Markets, said.
Japanese stocks bucked the softer trend in Asia, closing up
1.8 percent to reach a one-week high as data showed Japan's
exports rose in May at their fastest annual rate in more than
The MSCI world equity index, tracking shares
in 45 countries, added 0.15 percent to bring its gains this week
to 1.2 percent, but with activity expected to be limited ahead
of the Fed statement.
Bund futures were also little changed ahead of the Fed and a
sale of 5 billion euros of new 10-year German bonds later in the
Ten-year German bonds yielded 1.55 percent, up
around 40 basis points since the beginning of May, mirroring a
rise of about 50 bps in equivalent U.S. Treasury yields
over the same period.
In cautious commodity markets, growth-linked metals like
copper, as well as safe-haven and inflation-linked
assets such as gold, were restricted to minor moves.
Three-month copper on the London Metal Exchange CMCU3 rose
0.1 percent to $7,013.25 a tonne, but this was not far
off its lowest price since early May.
"Base metals have been struggling as portfolio managers and
investors have been cutting their exposure to commodities," said
Victor Thianpiriya, commodities strategist at ANZ Bank.
Brent crude held above $106 a barrel, near an
11-week high, as hopes for ongoing Fed stimulus underpinned
U.S. crude for July delivery touched a nine-month
high of $99.01, before easing to $98.81, still up 37 cents.