(Corrects day in first paragraph to Tuesday, not Wednesday, and
month in second paragraph to July, not June)
* European shares lower after ZEW sentiment index dips,
Bernanke in focus
* MSCI Asia ex-Japan up; Nikkei hits 7-1/2 week high after
* U.S. dollar index wobbles, but holds off last week's lows
* Aussie dollar surges after central bank says stance
By Marc Jones
LONDON, July 16 European shares took a break
from their recent climb on Tuesday and safe-haven German Bunds
rose, as a surprise dip in German confidence fed mild
profit-taking while markets awaited fresh clues on U.S. monetary
German analyst and investor sentiment unexpectedly fell in
July as a slew of negative data on Europe's largest economy and
renewed signs of tension in the euro zone hit confidence.
Having jumped almost 8 percent in the last few weeks on
renewed promises of support from major central banks, European
shares were already in profit-taking mode ahead the data, which
also hit the euro and sent safe-haven Bunds higher.
The broad FTSEurofirst 300 index was down 0.3
percent by 1100 GMT though it had clawed back some ground as the
larger falls on Frankfurt's DAX and Paris's CAC 40
were offset by focus on the Federal Reserve's stimulus
Rate strategist Piet Lammens at KBC played down the
potential impact of the fall in German sentiment on the European
Central Bank, which is widely expected to keep rates on hold
throughout this year and next.
"The ECB might cut rates, but rather than on sentiment
indicators I think it will depend on conditions in the financial
markets," Lammens said.
London's FTSE outperformed and sterling
hit a session low of $1.5046 after UK inflation data came in
slightly below consensus keeping alive chances that the Bank of
England will keep monetary policy easy.
Federal Reserve Chairman Ben Bernanke's twice-yearly
monetary policy report to Congress on Wednesday and Thursday was
set to offer more clues on the U.S. central bank's policy as it
looks to wind down its stimulus programme.
Markets went into mild panic in mid-June after the Fed laid
out a rough timetable for phasing out its $85 billion-a-month
stimulus programme, but stock markets in particular have bounced
back strongly as the Fed has softened its tone.
"The recent mixed data shows how difficult it is for the
Fed, and also consequently for the markets, to read when the
first tapering will be." said Rabobank economist Philip Marey.
"If he (Bernanke) seems more or less satisfied with how
things are going then that would be taken as an indication that
we are going to see something in September."
RECORD WALL STREET
U.S. stock futures, pointed to a steady for Wall Street
after Citigroup's strong results on Monday had
helped the S&P 500 end higher for an eighth day, the
longest such streak since mid-January.
In debt markets, benchmark German Bunds
moved into positive territory as investors went in
search of safe-haven paper after the ZEW data and U.S.
Treasuries recovered after some selling in Asia.
Periphery euro zone bonds remained choppy, however, as
political turmoil continued to rumble in the background.
Italian and Spanish bonds swayed to and fro, while
Portuguese bonds firmed as the bailed-out
country's political parties agreed to talks, though investors
doubted a deal would be reached soon.
Major central bank assets: link.reuters.com/cew98s
Asset returns in 2013: link.reuters.com/dub25t
Asian foreign fund flows: link.reuters.com/rad59t
With Monday's mixed U.S. data adding to the U.S. policy
debate ahead Bernanke's testimony on Wednesday the dollar edged
down 0.35 and 0.5 against the yen to 99.32 yen,
well below last week's high of 101.21.
Commodities including oil, gold and copper all inched higher
as the dollar eased, the main currency for raw material trading.
Brent oil has risen nearly $9 in the last three weeks and
U.S. crude more than $13, lifted by tumbling U.S. crude oil
stocks, an improving economic outlook and supply disruption
after turmoil in Middle East countries such as Egypt.
"Global demand has picked up strongly. There are huge supply
problems at a time when refineries are increasing output," said
Amrita Sen, analyst at Energy Aspects.
In Asian trading, shares had firmed as Japan's Nikkei
added 0.64 percent to its recent 18 percent rally.
The yen, a key driver in the jump in the Nikkei, could face
more pressure as the week progresses.
The ruling party of Japanese Prime Minister Shinzo Abe is
expected to post a big win in Sunday's upper house election,
clearing the way for him to pursue his aggressively reflationary
Further south, the Australian dollar surged half a U.S. cent
after minutes from this month's Reserve Bank of Australia
meeting gave little hint of a near-term rate cut.
(Additional Reporting by Simon Falush; Editing by Hugh Lawson)