* Major stock markets dip as US fiscal showdown looms
* Currencies hug tight ranges, Fed, ECB uncertainty cited
* German Ifo index confirms only modest growth outlook
* Oil eases ahead of Iran nuclear talks
By Richard Hubbard
LONDON, Sept 24 Anxiety over the lack of clarity
on U.S. fiscal and monetary policies weighed on world shares and
commodity markets on Tuesday, keeping major currencies in tight
Caution has gripped the markets as a political showdown
looms in Washington over budget talks, and as investors try to
decipher a string of comments from Federal Reserve officials
over the future of its stimulus programme.
"In the short term, it (the market) has got the U.S. budget
negotiations and the debt ceiling negotiations to cope with, so
that's restraining animal spirits a little bit," said Nick
Beecroft, chairman of Saxo Capital Markets.
U.S. stock index futures pointed to a mixed start when Wall
Street opens after early weakness in Asian markets and a steady
session in Europe left the MSCI world equity index
down 0.1 percent for the day.
U.S. Congressional authorisation for the government to keep
spending money runs out on Sept. 30, and tensions are rising as
lawmakers struggle to pass a "continuing resolution" (CR) needed
to avoid a shutdown.
Meanwhile the dollar was hit after a string of comments from
Federal Reserve policymakers suggesting the central bank was
wary of jeopardising a still fragile U.S. recovery by scaling
back its stimulus too early, though its plan to do so by the end
of the year was intact.
New York Fed President William Dudley was the latest to fuel
the debate, telling CNBC in an interview broadcast on Tuesday,
that he "certainty wouldn't want to rule out" a reduction in the
central bank's bond-buying programme later this year, adding the
Fed expected slower economic growth now than it did in June.
Against the Japanese currency, the dollar fell 0.2 percent
to 98.62 yen, although against a basket of currencies it
was little changed as the euro slipped.
Dudley's comments helped benchmark 10-year U.S. Treasury
yields edge down 2 basis points to around 2.69
percent, off the near two-year high of 3.0 percent hit on Sept.
Fed policymakers have been on the offensive this week
explaining the reasons behind the central bank's surprise
decision last week not to reduce its asset purchases from the
current $85 billion monthly pace, which had been widely
That decision had left investors both encouraged that
support for the economy would continue for a while longer but
also in some doubt over whether they had overestimated the
solidity of the U.S. economic recovery.
The single currency eased against the dollar after German
data came in slightly below expectations, although it showed the
euro zone's biggest economy on a firm growth path, and on signs
emerged that the European Central Bank stood ready to keep
supporting the economy.
The Munich-based Ifo think tank said business morale
improved slightly to its highest level in 17 months in
September, with the key export sectors looking strong.
"The further rise in German Ifo business sentiment confirms
that the economy is recovering, but we continue to expect growth
to be reasonably sluggish," said Ben May, a European economist
at Capital Economics.
The euro was still holding near weaker levels reached on
Monday when European Central Bank President Mario Draghi said he
was ready to inject more liquidity into banking markets if
necessary to support the economy.
Those remarks were backed up by ECB policymaker Ewald
Nowotny on Tuesday who said any withdrawal of the current level
of policy support would have to be implemented extremely
In commodity markets, gold slipped for a fourth straight
session, shedding 0.4 percent to $1,317.10 an ounce as investors
fretted over what the Fed will do next.
The story was much the same in copper futures which
held at $7,227.51, from last week's peak of $7,368.00.
Worries that money printing by central banks to buy assets
will stoke inflation have helped boost the price of metals like
gold, usually seen as an inflation-hedge.
An easing in geopolitical tensions was the main factor
driving oil markets as signs of a reconciliation between Iran
and the West over its nuclear policies raised hopes of greater
Iran has agreed to new talks on its nuclear programme with
top diplomats from six world powers, including U.S. Secretary of
State John Kerry, raising hopes that Tehran's relations with the
United States could thaw.
"Geopolitical tensions are reducing and oil output is rising
so these two factors are driving oil futures to moderate," IHS
analyst Victor Shum said.
November U.S. crude was off 41 cents at $103.18 a
barrel, down for a fourth day, and Brent crude for November
fell 33 cents to $107.83 per barrel.