* Tapering talk keeps dollar near 6-week high
* Europe shares pegged back by Syria concerns
* Wall Street set for soft open; MSCI global index flat
* Brent crude holds above $115 a barrel, gold eases
By Richard Hubbard
LONDON, Sept 4 The risk of military action on
Syria and imminent central bank policy decisions kept the dollar
near a six-week high on Wednesday and checked any gains in
shares and oil from upbeat data on the global economy.
The uncertainty about the impact of any action on Syria put
pressure on U.S. stock indexes as well, signalling a softer
start to trading when Wall Street opened.
Military strikes on Syria moved a step closer on Wednesday
after Russian President Vladimir Putin signalled a readiness to
drop his opposition if Damascus were proven to have carried out
a chemical weapons attack.
Putin's comments come after U.S. President Barack Obama
clinched the backing of key figures in Congress for his plan to
punish the Syrian government with limited strikes, though no
vote on that proposal is due until next week.
Investors also faced a busy period of potentially market
moving events in the next few days, including a G20 summit in St
Petersburg, policy decisions on Thursday from the Bank of
England, Bank of Japan and European Central Bank, and the U.S.
jobs report on Friday.
Together, it all put a lid on activity.
"There's a whole host of stuff that has the potential to
undermine risk appetite," said Michael Hewson, senior market
analyst at CMC Markets. "If you're a little bit concerned about
the outlook, you're not going to take long-term investment
Given the risks, the dollar dipped slightly against a basket
of major currencies at 82.30, but stayed near its
strongest level since July 22, supported by Tuesday's data
showing U.S. factory output growing surprisingly strongly.
The numbers were seen as increasing the likelihood that the
Fed will begin cutting its current economic stimulus at its
policy meeting on Sept. 17-18, buoying U.S. bond yields which
add to the attraction of the dollar.
"U.S. economic data has helped the dollar. What is important
is the U.S. labour market report which is a strong hint for the
future course of Fed monetary policy and when they will start
tapering," said Ulrich Leuchtmann, head of FX research at
The two-year U.S. Treasury note yield was at 0.43
percent, not far from the 0.442 percent hit on June 26, its
highest since July 2011.
On equity markets MSCI's world share index,
which tracks moves in 45 countries, was little changed as the
Syrian concerns offset the brighter U.S. outlook.
Oil prices actually eased 0.4 percent despite all the talk
about a Syrian strike, though Brent crude down 50 cents at
barrel at $115.17 was still well above levels of near
$111 a barrel seen before the gas attacks came to light.
Some safe-have buying also allowed gold to hold above $1,400
an ounce though the price had slipped by 0.6 percent from
the peaks hit on Tuesday when a missile test by Israeli forces
training with the U.S. Navy set nerves on edge.
Riskier assets worldwide were drawing some support from a
run of surprisingly strong manufacturing activity data from the
United States, China, the UK and across Europe this week.
On Wednesday new data revealed the pickup spreading to the
service sector with activity in China hitting its highest level
for five months in August.
Euro zone businesses also recorded their best month in over
two years in August as orders increased for the first time since
mid-2011, a separate survey showed, suggesting the region's
economy will grow slightly this quarter.
"The euro zone recovery is looking increasingly broad-based,
with more sectors and more countries emerging from recession,"
said Chris Williamson, chief economist at data collator Markit.
However, the strong data proved no match in the European
equity markets for a profit warning from the region's biggest
budget airline, Ryanair, which highlighted concerns about the
outlook for the whole transport sector if tension in the Middle
East were to cause a spike in oil prices.
Europe's broad FTSE Eurofirst 300 index was down
0.5 percent for a second day of losses, though it has risen 15
percent since early June on expectations that a broad recovery
is taking hold across the recession-hit region.
Within Europe, Italy was the hardest hit, with the FTSE MIB
down nearly two percent at one-week lows after some
Italian papers said former prime minister Silvio Berlusconi, who
faces possible eviction from the Senate over a tax fraud
conviction, was considering pulling the plug on the coalition