* Wall Street expected to see subdued start to 2014
* China manufacturing index dips, missing forecasts
* European, Asian share markets soft, Nikkei still shut
* Dollar near highest in over five years vs yen, euro falls
* Gold bounces, talk of Chinese demand for commodities
By Marc Jones
LONDON, Jan 2 World share markets made a groggy
start to 2014 on Thursday, with investors using some
disappointing Chinese manufacturing data as a reason to cash in
on some of last year's gains.
After enjoying their best run in 15 years last year, U.S.
shares were expected to edge lower when trading begins. Further
gains depend on stronger growth this year, and investors were
looking to U.S. jobless claims and updated December PMI figures
to gauge the improvement in the world's largest economy.
Manufacturing data from China overnight and on Wednesday
proved disappointing. Equivalent data that
showed euro zone manufacturing running at its fastest rate since
mid-2011 were not enough to lift shares.
The pan-European FTSEurofirst 300 was down 0.3
percent before the U.S. open. It had started the day at a 5 1/2-
year high. Earlier declines in Asia had left MSCI's 45-country
share index down 0.5 percent.
"We think it is a temporary blip in China, but that and also
perhaps the data showing the contraction in Singapore's economy
earlier, maybe gave the market a slight scare," said ABN Amro
economist Aline Schuiling.
Traders showed more appetite for both growth-attuned
commodities and the dollar. At the same time, they trimmed their
holdings of safe-haven bonds.
Gold grabbed the limelight, climbing 1.5 percent to $1,220
an ounce. The move recouped some of the losses that made
last year gold's worst in three decades.
The buying spilled over into silver and copper, with dealers
talking of demand from Chinese traders looking to pick up
commodities on the cheap. Three-month LME copper rose to
its highest in seven months.
DOLLAR FLEXES MUSCLE
Among major currencies, the main theme remained weakness in
the yen. The euro also tumbled as the dollar flexed its muscles.
The greenback hovered near a five-year high versus the
Japanese currency at 105.30 yen, with the focus on the Federal
Reserve's gradually scaling back its bond-buying stimulus.
The euro dropped to 143.7870 yen, having clocked
gains of 26 percent in 2013 to reach a five-year peak of 145.67.
Against the dollar, it saw its biggest drop since mid-November,
sinking almost a euro cent to $1.3656.
"Today is the first day where fundamentals work out again
... That's why there is pressure on euro/dollar," said Ulrich
Leuchtmann, the head of currency research at Commerzbank in
Dealers suspect the euro currency got support in recent
weeks from the repatriation of funds by European banks and from
the euro zone's expanding current account surplus. But a general
assumption remains that rising U.S. Treasury yields will
eventually lift the dollar.
Yields on U.S. 10-year paper are up at 2 1/2-year highs of
3.03 percent. Even shorter-dated rates have been rising as
improving U.S. economic data justify the Federal Reserve's
decision to scale back its asset-buying.
A speech by outgoing Fed Chairman Ben Bernanke on Friday may
offer some more guidance on the central bank's plans.
Prices of German Bund futures fell to their lowest
since September 2013 on Thursday as investors offloaded the
top-rated bonds in favour of riskier assets.
The premium Italian and Spanish bonds offer over benchmark
German Bunds also sank to its lowest since mid-2011 as their
manufacturing data beat expectations in both countries.
In oil markets, U.S. crude futures were trading 81
cents lower at $97.62 a barrel, while Brent dropped $1.25 to
just below $110.00.