* Euro dips, shares edge higher ahead of ECB meeting
* Wall Street expected to drop after Tuesday's rebound
* Yen hits near 3-year low vs dollar, euro on prospect of
BOJ's next head
* Oil, copper, platinum underpinned by demand outlook
By Marc Jones
LONDON, Feb 6 The euro dipped and European
shares fell on Wednesday as investors waited to see if the
European Central Bank would respond to the currency's recent
jump after Germany said it was not overvalued.
U.S. stock index futures also pointed to a lower open on
Wall Street after the benchmark S&P 500's rally of more than 1
percent a day earlier.
The ECB is widely forecast to keep rates at a record low
0.75 percent when it meets on Thursday, but focus will be on
whether its policymakers are worried the euro's strength could
undermine any recovery in troubled economies like Spain.
Following complaints about the currency's level from France,
German Chancellor Angela Merkel's spokesman said the currency
was not overvalued and that competitiveness could not be
achieved via exchange rates.
Against the dollar, the euro was 0.5 percent lower at
$1.3516 by 1330 GMT but was well within this week's range of
$1.3450 to $1.3710.
Japan's yen, at the centre of concerns that some countries
are trying to devalue their currencies to boost growth, nearly
hit a three-year low earlier in the day on the view a new Bank
of Japan governor will ease policy aggressively once in office.
"Euro-dollar looks quite comfortable to the low to mid
1.35's and I think that is where we will stay ahead of
tomorrow's ECB meeting," said National Australia Bank strategist
"When you look at the big fall in the yen, it just interests
me whether they (ECB) see that as a disorderly move. It is
raising eyebrows around the world and the euro's rise is part of
The broadly stronger dollar touched 94.075 yen, its
highest since May 2010 before profit taking saw it drop back to
93.55 yen, while the euro also rose as high as 127.71
yen, its strongest since April 2010, before it also eased.
BOJ Governor Masaaki Shirakawa has said he will step down on
March 19, opening the way for a successor supporting the kind of
expansionary policies the government favours.
Global policymakers meet in Moscow next week. New Japanese
Prime Minister Shinzo Abe's support for aggressive easing does
not seem to have caused an outcry from other countries although
there have been sporadic complaints from Germany and South
According to a Japanese government official, the IMF's
number two David Lipton said the BOJ has taken the right
direction in committing to a 2 percent inflation goal and its
next governor needs to show how that goal will be achieved.
Having been up for most of the day, European shares fell
ahead of the U.S. open as profit taking ahead of the ECB's
meeting kicked in and concerns about banks and fragile politics
in the region returned.
European stocks led a global sell-off on Monday sparked by
worries over a corruption scandal in Spain and polls showing
Italy's former prime minister Silvio Berlusconi regaining ground
before elections this month.
"It doesn't feel like the correction threat has fully passed
in Europe," said one European trader.
The pan-European FTSEurofirst 300 was down 0.5 percent by
1330 GMT having been up as much as 0.5 percent earlier in the
day after an upbeat outlook from the world's largest miner
ArcelorMittal boosted growth hopes.
German industrial figures also showed an 0.8 percent
month-on-month rise in orders in December, a rise the economy
ministry said showed the weakness in the sector was coming to an
Despite the late selling in Europe, earlier rises in Asia
led by Japan, left the MSCI world share index in
positive territory and just below a 22-month high.
The slide in the yen helped Japanese equities reach their
highest since October 2008 while expectations of more monetary
easing pushed two-year Japanese government bond yields
down to a nine-year low of 0.045 percent
The growing confidence in the global economic outlook also
supported oil prices and gave a boost to copper and a wide range
of precious metals on Wednesday.
Brent crude, which hit a 20-week high on Tuesday, was
trading around $116.30 a barrel down slightly on the
day, but some analysts expect it to test $120 a barrel this
month if there are no supply shocks.
"The markets are now more optimistic about the world
economy, so oil prices are heading up, but gradually," said Ken
Hasegawa, a commodity sales manager at Newedge Group.
Gold slipped $2.04 an ounce to $1,670.56, a drop
partially triggered by an announcement from India, the world's
biggest consumer of the precious metal, that the central bank is
considering restrictions on imports by banks.
Investors will be looking out for China's trade numbers due
on Friday for more clues on the health of the global economy.
In the European bond market, benchmark German Bund futures
remained slightly higher after Germany saw strong demand at a
sale of five-year debt. This was due to a recent rise in yields
and political uncertainty in Spain and Italy.
Corruption allegations in Spain have put Prime Minister
Mariano Rajoy under pressure and a scandal at one of Italy's
oldest banks has led to an increasingly uncertain outcome in
elections later in February.
"There are fairly ominous signs (in the periphery). I know
they (Italian and Spanish bonds) had a good day yesterday, but
there's Spanish supply coming up," one trader said.
Financial and corporate credit spreads were modestly tighter
given the better tone in the equity markets and German
government bond prices.
The spread on the main iTraxx five-year index
- which measures the credit risk premium of a basket of high
quality European bonds - narrowed by around 2.0 percent.
The index touched its highest level for the year on Monday
in the selloff which hit all risk asset markets when growing
political uncertainty in Spain and Italy rattled investors.