Tapering prospects boost dollar, European stocks at new peaks

Tue Jan 21, 2014 8:09am EST
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By Carolyn Cohn

LONDON (Reuters) - European shares hit fresh 5-1/2 year highs on Tuesday, boosted by easier Chinese money markets and a strong performance from Unilever, while the dollar rose on a report the Federal Reserve would again trim its bond buying next week.

Chinese money market rates fell after the central bank added more than 255 billion yuan ($42 billion) into the financial system, easing concerns another credit crunch was underway less than a month after a late December squeeze.

In Europe, a fourth-quarter recovery in emerging markets sales boosted consumer goods maker Unilever (ULVR.L: Quote) <UNc.AS'>s 2013 results and sent its shares up nearly 4 percent.

European shares .FTEU3 hit 5-1/2 year highs, although world stocks .MIWD000000PUS were steady overall.

U.S. stock futures were also pointing higher, with the S&P 500 up 0.26 percent and the Dow up 0.5 percent.

The euro fell towards Monday's two-month troughs after the ZEW indicator of German economic sentiment for January unexpectedly fell to 61.7 after surging to 62.0 in December.

The key Euribor lending rate held steady, however, as banks slowly reduce their reliance on European Central Bank funding and turn to the market again in a sign of growing confidence. The ECB has pledged to intervene should the rise in bank-to-bank lending rates that underpin borrowing costs across the economy become "unwarranted".

The dollar was broadly stronger, bouncing to 104.68 yen after the Wall Street Journal reported the Federal Reserve is on track to trim its bond-buying for the second time in six weeks, paring back by $10 billion to $65 billion a month.   Continued...

People walk past an electronic information board at the London Stock Exchange in the City of London October 11, 2013. REUTERS/Stefan Wermuth