* Global stocks retreat from record highs
* Earnings buoying European equities
* Investors await substantive policy update from Trump
By Helen Reid
LONDON, Feb 17 Global equity markets were set to
end the week on a softer footing on Friday, after setting record
highs in the previous two sessions, as investors looked for
clarity on U.S. President Donald Trump's policies on tax and
The MSCI All-Country World index was still
headed for its fourth straight week of gains after hitting a
record high on Thursday, buoyed by positive signs for global
economic growth, but Asian and European markets eased as
investors cashed in recent gains.
MSCI's index of Asia-Pacific shares outside Japan
pulled back 0.2 percent, Tokyo stocks closed
down 0.6 percent and the pan-European STOXX 600 index was 0.5
percent lower, although it remained near its highest
level in 13 months.
European stocks have been boosted by positive earnings
surprises. With more than half of the STOXX 600
companies having reported, 55 percent had beaten forecasts.
"As long as the fundamentals and the earnings story continue
to carry through, there's a reason to be invested in these stock
markets," said Nandini Ramakrishnan, global market strategist at
JPMorgan Asset Management.
Although the dollar was 0.3 percent firmer on the day, it
was hovering near a one-week low against a basket of currencies
and headed for its sixth week of losses in the last
eight, as investors awaited substantive market-friendly news
from President Donald Trump on tax reform.
The greenback hit a one-month high on Wednesday after U.S.
Federal Reserve Chair Janet Yellen supported a near-term rate
hike due to signs of robust economic growth.
Junichi Ishikawa, senior forex strategist at IG Securities
in Tokyo said the dollar's recent bounce lacked conviction.
"This shows that the market is still trying to work out the
implication of President Trump's policies, of which his approach
to trade may not be supportive for the dollar," he said.
Sterling fell half a percent to $1.2427 after data
showing retail sales in Britain fell 0.3 percent month-on-month
last month, against expectations for a 0.9 percent rise.
EURO DEBT YIELDS DIP
Bond yields slipped pretty much across the board. Yields on
U.S. Treasuries, which tend to set the bar for
global borrowing costs, hovered at 2.43 percent having crept
higher during the week on U.S. rate hike speculation, while
yields on Europe's benchmark, German Bunds, were down 3 basis
points at 0.32 percent.
There has been a noticeable divide this week, with
safe-haven Bunds and other core countries like France and
Austria have seeing yields rise, while Spain and Italy have seen
theirs fall for the first week in five, helped by some soothing
noises from the European Central Bank.
The ECB's minutes on Thursday indicated little appetite for
curbing stimulus, setting the scene for a divergence in central
bank policy between the U.S. and Europe.
"It's too soon to tell what divergent monetary policy will
do to equity markets, but higher rates in the U.S. may help
financials do better," said Ramakrishnan.
Gold was set for its third week of gains as political
uncertainty spurred demand for the safe haven precious metal. It
was down 0.2 percent on the day.
Brent crude futures were down 0.1 percent, paring
back earlier gains. OPEC sources told Reuters the producers'
club could extend its output cut in order to rein in global
Copper was set to end the week lower as
profit-taking pared back the price of the three-month copper
contract, though concerns over supply from Chilean and
Indonesian mines remained.
For Reuters Live Markets blog on European and UK stock
markets see reuters://realtime/verb=Open/url=http://emea1.apps.cp.extranet.thomsonreuters.biz/cms/?pageId=livemarkets
(Additional reporting by Marc Jones and Nichola Saminather,
Editing by Nigel Stephenson and Alexander Smith)