* Italian shares, euro rise as Italy limps towards bank
* Profit-taking pulls dollar off this week's highs
* Wall Street set to open down slightly
* Crude oil slips, metals extend decline
* Graphic: World FX rates in 2016 tmsnrt.rs/2egbfVh
By Marc Jones
LONDON, Dec 22 European markets were poised for
one last burst of action before the end of the year on Thursday,
with Italy expected to outline plans to rescue the world's
oldest and now its most troubled bank, Monte dei Paschi di
With investors in most major markets already in holiday
mode, stocks, oil and metals drifted lower in thin trading and
even the dollar eased off this week's 14-year high.
Futures pointed to a slightly lower open on Wall Street
although U.S. shares remain very near all-time peaks.
Shares in Milan climbed 0.6 percent, flanked by the
euro on hopes for a government bailout for Monte dei
Paschi, while European shares followed Asian markets
Sources told Reuters the bank failed to pull off a
last-ditch private rescue plan on Wednesday, meaning a state
rescue looked inevitable with reports in Italy on Thursday
saying that could be completed between two to three months.
"This situation has dragged on for years without a clear
solution. Now a solution is in sight," LC Macro Advisors head
Lorenzo Codogno said.
"My perception is that the government backstop will be
welcomed by financial markets and it will be a plus for the
(Italian) economy as well."
The Monte dei Paschi saga is one of the reasons why Rome's
government bonds have been the worst performing in the euro zone
this year, losing roughly 4 percent. tmsnrt.rs/2hncDTn
Benchmark 10-year Italian and Spanish yields rose 4-5 basis
points (bps) to 1.86 percent and 1.41 percent
, respectively, broadly in line with the wider bond
Despite Italy's climb, the pan-European STOXX 600
was down 0.1 percent, falling for a second straight session
after hitting its highest level since Jan. 4 on Tuesday.
Miners were the biggest sectoral fallers, down 1.4
percent as copper hit a one-month low but that comes after a
near 60-percent surge for the stocks in 2016.
The dollar, which has been on a tear since Donald Trump's
election win stoked hopes of a fiscal boost for the U.S.
economy, also dipped for a second day as traders booked profits
before a batch of U.S. data including revised GDP figures.
"You could see the dollar continue higher next year, maybe
mid-single digit for the DXY index, but we would be
surprised if it was another 10 percent," JP Morgan Asset
Management global market strategist Mike Bell said.
MSCI's broadest index of Asia-Pacific shares outside Japan
slipped 0.7 percent with the Nikkei
finishing 0.1 percent lower having hit one-year highs this week.
Japan's cabinet approved a record $830 billion spending
budget for fiscal 2017 that counts on low interest rates and a
weak yen to limit borrowing, underscoring the challenge Tokyo
faces in curbing the industrial world's heaviest debt burden.
Hong Kong's Hang Seng index was down 0.8 percent
after touching its lowest levels since July, though Australian
shares finished up 0.5 percent, extending their gains
into a fourth straight session.
In Europe, the euro was last up 0.3 percent at $1.0449
having pushed away from Tuesday's near 14-year low of
$1.0352 after attacks in Germany and Turkey.
Crude oil prices slipped in tepid trading, pressured by an
unexpected rise in U.S. crude inventories last week and moves by
Libya to boost output over the next few months.
U.S. crude dropped 35 cents to $52.14 per barrel, while
Brent crude shed 35 cents to $54.11. Spot gold
edged down to $1,129.91 an ounce while industrial metals copper,
zinc and tin continued their recent declines.
Major moves were thin and far between though with many
investors already departing ahead of this weekend's Christmas
and New Year holiday. Markets in Tokyo will be closed on Friday
for the Japanese Emperor's birthday.
The dollar edged up 0.1 percent against its Japanese
counterpart to 117.65 yen, but remained shy of its
10-1/2-month high of 118.66 touched on Dec. 15.
Later on Thursday, the United States will release a third
revision of U.S. third-quarter gross domestic product. Durable
goods orders for November and weekly initial jobless claims were
also scheduled to be released.
"There's a lot of year-end book-closing and
position-squaring, and less in terms of data and events to go
on," Barclays Singapore's head of FX strategy, Mitul Kotecha,
(Additional reporting by John Geddie in London and Lisa
Twaronite in Tokyo; editing by Susan Thomas)