LONDON (Reuters) - The dollar and global shares recovered from one-month lows on Tuesday and German Bund futures eased, after weak U.S. data calmed concerns about an early cut in central bank stimulus.
Markets were generally more settled than in recent sessions and as a lull in this week's busy schedule of central bank meetings, U.S. data and announcements on Japan's stimulus program, offered a break from recent sharp moves.
Wall Street was expected to open flat
The dollar steadied, having climbed back above 100 yen and recouped some of Monday's wider falls .DXY after the ISM index of U.S. factory activity fell to its lowest since June 2009.
The figures had helped soothe jittery markets by bolstering the view that it is still too early for the Federal Reserve to start winding down its support program. Nevertheless with such talk unlikely to go away, analysts said the market swings would continue, especially with U.S. job data due this week.
"Were are into this very volatile period which we were always going to have after such expansionary monetary policy," said National Australia Bank strategist Gavin Friend.
"Markets, in typical forward-looking fashion, are seeing the tapering as the beginning of the end of QE. You can argue that the Fed will still be buying significant quantities of bonds so markets shouldn't really react, but it is about the direction of travel."
European stocks .FTEU3.STOXX50E were off their highs of the day by the afternoon but remained 0.4 percent higher and on course to snap a two-day losing streak that had left them at their lowest level since early May. .EU
With investors also keeping positions tight ahead of the European Central Bank and Bank of England monthly meetings on Thursday, German Bund futures dipped and peripheral euro zone debt edged up.
A 10-month rally in euro zone debt has waned in recent weeks as talk of a cut in Fed stimulus has pushed up yields.
Commodity markets were also steadier. Copper climbed for a second session, while gold and oil were both slightly softer at $1,400 an ounce and $101.80 a barrel respectively.
After the volatility of recent days caused by an escalation of political tensions, Turkish shares .XU100 and the lira regained ground. That meant that most of the bigger moves of the day were once again on Asian stock markets.
Japan's Nikkei .N225 rose 2 percent, its biggest one-day rise in three weeks as currency swings amplified moves ahead of Wednesday's announcement from Prime Minister Shinzo Abe on the third leg of his "Abenomics" stimulus strategy.
It was at a 5-1/2-year peak and up more than 50 percent on the year until two weeks ago but has since lost 15 percent as doubts about the $1.4 trillion stimulus drive have crept in.
Abe's latest changes are likely to center on economic reforms but sources told Reuters the government could also include steps urging Japan's public pension funds to boost their investment in equities and overseas.
"We are right at the start of a multi-year process probably," said Grant Lewis, a Daiwa Securities economist in London
Australian shares rose 0.3 percent and the Aussie dollar dropped 1 percent to $0.9671 after the country's central bank left interest rates unchanged as expected, but said there was some scope for further easing.
The firmer U.S. dollar also pushed the kiwi dollar lower but had little impact on the euro which was steady at $1.3075.
Markets' focus was largely on the ECB's meeting on Thursday with analysts expecting it to hold off from any fresh policy action this month to see whether economic recovery materializes in the second half of the year as it expects.
Additional reporting by Paul Carrel in Frankfurt; Editing by Catherine Evans, John Stonestreet