* World share gains pause after sharp rally
* Worries over timing of Fed taper resurface
* U.S. stocks head for mixed day after Monday's
* Copper, silver at 3-mth lows, oil eases
By Richard Hubbard
LONDON, Nov 19 World shares fell on Tuesday as
concern that the recent stock rally has been overdone grew after
the OECD cut its global economic forecasts, while doubt over
when the Federal Reserve may trim its stimulus supported the
In its latest snapshot of economic activity, the Paris-based
Organisation for Economic Cooperation and Development (OECD) cut
its 2014 forecast for global economic growth to 3.6 percent from
the 4.0 percent it saw in May.
Equity investors are concerned that the recent rally, driven
by the loose policies of major central banks, has far outpaced
the underlying economic improvement, leaving share prices ripe
for a sharp fall.
"From our perspective we're getting close to selling into
this strength," said Wouter Sturkenboom, investment strategist
at fund managers Russel Investments. "I think you'd be hard
pressed real money being willing to go overweight and be very
confident about it, and that's the problem."
The sustainability of the current rally was called into
question on Monday when the Dow and the S&P 500
retreated from record levels near the close of trading. Stock
index futures pointed to a mixed session later.
MSCI's world equity index, tracking shares
in 45 countries, followed the tone set by Wall Street and edged
down 0.2 percent, backing away from Monday's 6-year peak.
In Europe, the worries about high share values amid a
generally weak quarterly earnings season and signs of a fragile
economic recovery left the broad FTSEurofirst 300 index
was 0.6 percent lower by late morning, off from a 5-year peak.
"Pan-European multiples are close to multi-year highs. That
means markets are no longer cheap and we need to see some
earnings improvement to warrant higher equity prices," said
Gerhard Schwarz, head of equity strategy at Baader Bank.
A strong reading on German analyst and investor sentiment
from the ZEW think tank had little impact as the positive
outlook was offset by a fall in the survey's current conditions
index to a level below forecasts.
Earlier, optimism sparked by China's bold economic reform
plans had continued to bolster Asian markets, lifting MSCI's
index of Asia-Pacific shares outside Japan by
0.1 percent to add to Monday's 1.4 percent rally.
DOLLAR FINDS FRIENDS
The dollar held steady on Tuesday caught between talk the
U.S. central bank could keep its easy policy stance until March
next year, and some optimistic comments on the economy by two
top Fed officials that may mean an earlier move.
William Dudley, president of the Federal Reserve Bank of New
York and one of the staunchest supporters of the Fed's
easy-money policies, cited labour market improvements and
stronger-than-expected growth in the third quarter as positive
signs for the U.S. economic recovery.
The mere hint that a December tapering is still possible was
enough to keep the dollar index steady against six other major
currencies at 80.83, though still not far from Monday's
low of 80.565. Against the yen, the dollar had fallen just 0.1
percent to 99.87 yen.
While the euro eased slightly to be at 1.3490, having
hit a 12-day high of $1.3542 on Monday, extending its recovery
after a sharp drop to two-month low of $1.3295 on Nov. 7 in the
wake of the European Central Bank's surprise rate cut earlier
Euro zone government bonds moved within narrow ranges with
10-year German yields slightly firmer at 1.7
percent, while lower-rated Spanish and Italian yields were
In commodity markets, the renewed concerns over when the
U.S. Federal Reserve could begin to taper its monetary stimulus
kept prices under pressure, with copper trading near a
three-month at $6,964 a tonne.
Gold inched lower to reach $1,270.55 an ounce after
dropping 1.2 percent on Monday, though silver had edged to a
fresh three-month low of $20.29 an ounce.
Brent oil had slipped to near $108 a barrel amid the Fed
worries but it was gaining support from continuing oil supply
disruption in Libya.