Shares sag, dollar dips before Fed minutes

Wed Jul 10, 2013 9:15am EDT
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By Marc Jones

LONDON (Reuters) - European shares and the strong dollar slipped on Wednesday after weak data from China and a rating downgrade of Italy curbed investors' ambitions pending the release of the Federal Reserve's June minutes.

After a five-day run of gains for world shares .MIWO00000PUS and the dollar's surge to a three-year high, investors were booking profits and squaring positions before the Fed minutes, which were due at 2.00 p.m. EDT.

Wall Street was expected to open fractionally lower after a hot streak this week which as taken the S&P 500 back to within 1 percent of May's all-time high.

Hints that the Fed will begin slowing its bond buying have sparked a near 5 percent rally in the dollar and a 50-basis point or so rise in the benchmark 10-year U.S. bond yield since mid-June, which has sent jitters through world markets.

Peter de Bruin, a senior economist at ABN Amro, said he expected the minutes to show a consensus forming at the Fed to start scaling back its $85 billion-a-month stimulus program in September, following a recent pick-up in U.S. data.

U.S. Treasuries were little changed at 2.6247 percent as U.S. trading began and benchmark German Bunds were also steady in Europe.

"I think we have already seen the main fireworks from the Fed's intentions to taper (scale back stimulus)," de Bruin said. "I would be surprised if we saw another strong rise in yields"

EURO PRESSURE   Continued...

A man walks through the lobby of the London Stock Exchange August 5, 2011. REUTERS/Suzanne Plunkett