* Euro shares extend gains, best week for world stocks in 8
* Fed cheer gives way to caution ahead of Chinese data on
* Selloff in dollar eases, currencies steadier after wild
By Marc Jones
LONDON, July 12 European shares rose on Friday
and the dollar steadied in the wake of reassuring comments from
the U.S. Federal Reserve on its stimulus programme, leaving
world stocks on track for their best week in almost eight
Europe was drawing support from a record high close on Wall
Street on Thursday, though investors in Asia turned cautious
after China's finance minister doused hopes of fresh stimulus
after he said sub-7 percent growth was acceptable for Beijing.
The broad FTSEurofirst 300 index was up 0.3 by
mid-morning as it eyed a fifth day of gains, while a steady
close in Asia left MSCI's world index, which
tracks stocks in 45 countries, on track for its best week since
This week's rally in financial markets has spread across
stocks and bonds to oil and metals and been driven by hints from
the U.S. Federal Reserve that it may not be as eager to phase
out its support as markets had started to believe.
"Markets have been reassured by the mention (by the Fed) of
financial conditions and the weakness of inflation," said Guy
Foster, head of portfolio strategy at Brewin Dolphin.
"There remains little reason for the Fed to tighten policy
although given their comments to date we assume a modest
reduction in purchases in September," he added.
After a week of swings in the world's big currencies,
foreign exchange markets were trading in a calmer fashion,
though positioning had started ahead of key Chinese growth data
due next week.
The dollar index, which tracks the greenback's
performance against a basket of major currencies, bounced off
2-1/2 week lows, having slumped more than 2 percent after Fed
Chairman Ben Bernanke assured it would remain in support mode.
That was the steepest fall in four years, normally seen only
during financial crises.
"This week was not pretty for some people. With dollar-longs
removed, no one wants to take big new bets ahead of China," said
a foreign exchange market researcher at an advisory firm in
Tokyo who requested anonymity.
The euro slipped to $1.3037 having jumped as far as
$1.3208 on Thursday though it was well off this week's trough of
One of the ECB's top policymakers, Peter Praet, dragged on
the currency after he said bank will keep interest rates at
current levels or cut them even further, as long as inflation
Portuguese government bonds fell again after
Lisbon requested a delay to the next review of the country's
bailout programme due to its political crisis.
Tensions were reignited this week after the country's
president threw out plans that looked to have patched up a
government rift and instead demanded some kind of grand
coalition. That would include opposition Socialists, who are
distinctly cool on the government's austerity and have been
calling for snap elections.
"Portugal is struggling as the government delays the next
quarterly review to the end of August, which is clearly fuelling
fears that Portugal doesn't have the appetite for further fiscal
consolidation measures in place," said Nick Stamenkovic, a rate
strategist at RIA Capital Markets.
The rest of the bloc made gains, however, as the updraft of
the Fed's soothing message this week was helped by an upgrade to
Ireland's credit outlook by rating firm S&P.
Commodity markets have enjoyed a particularly strong run
this week as the talk of ongoing central bank support has
bolstered hopes of a pickup in global growth.
Gold along with other precious metals eased after
four days of gains but was on track for its biggest weekly gain
in nearly two years. Copper was cruising to its best
week in two months as it dipped back below $7,000 a tonne.
Brent oil was steady at just under $108 a barrel
having hit a three-month high on Thursday as the prospect of
more supply from non-OPEC producers and concerns about China's
demand growth capped gains.
""We are seeing some concern that the upward momentum (in
prices) has reversed," said Michael McCarthy, chief market
strategist at CMC Global Markets in Sydney.