LONDON (Reuters) - World stocks fell back on Friday, but were set for a fourth week of back-to-back gains following generally strong U.S. earnings and assurances from the Federal Reserve about its plans for stimulus withdrawal.
Major currency and commodity markets were subdued, with the dollar .DXY giving back some of Thursday’s gains, the euro steady and the yen pushing up on position-squaring ahead of elections in Japan on Sunday.
Europe’s FTSEurofirst 300 .FTEU3 share index was down 0.4 percent by mid-morning after some weaker earnings overnight, but it was firmly on course for its first four-week run of uninterrupted gains since May, as was MSCI’s 45-country all-world index .MIWO00000PUS, which fell 0.1 percent.
Analysts say the rises in world stocks have been fuelled this week by solid corporate earnings, especially in the United States, and by reassurance from Fed Chairman Ben Bernanke over the U.S. central bank’s easy monetary policy.
“A lot of cash has gone into the market over the last few months but people are now sitting back a bit,” said Terry Torrison, managing director at Monaco-based McLaren Securities.
Wall Street finished at another record high on Thursday but was expected to open 0.2 lower when it resumes later, after disappointing results from Google and Microsoft after the bell. .T.N
Asian trading was choppy overnight with profit-taking on Japan’s Nikkei .N225 matched by some cautious yen buying ahead of Upper House elections on Sunday.
The elections are expected to strengthen the hand of Prime Minister Shinzo Abe and his radical stimulus strategy, with his ruling Liberal Democratic Party (LDP) and its New Komeito Party (NKP) coalition partner expected to win resoundingly.
Some economists worry that if the LDP wins outright Abe could sideline economic reforms and prioritize more nationalist policies, though that was not the consensus.
“If the LDP-NKP coalition wins control of the upper house and receives a decent mandate for reform, we would remain comfortable with our USD/JPY forecast profile of 103 in 3 months and 105 in 12 months,” Barclays Capital analysts wrote in a report.
In the debt market, German Bund futures were in a holding pattern having hit their highest level in six weeks in the previous session.
This week’s reassurances from Bernanke have helped beat back lingering concerns about near-term rises in bond yields and reduced volatility in both core and emerging financial markets.
Euro zone periphery bonds were also little changed following gains on Thursday after the ECB loosened its lending rules, and after Portugal’s centre-right government easily defeated a no-confidence vote.
Ten-year Spanish government bond yields were 1.3 basis points higher at 4.65 percent while the Italian equivalent was down 1.3 bps at 4.41 percent. Portuguese 10-year yields were 3.3 bps lower at 7.07 percent.
Market participants were also awaiting a meeting of Group of 20 finance ministers for signs of an orchestrated approach to the end of U.S. money-printing, which could help defuse volatility in global markets.
The G20, which meets in Moscow on Friday and Saturday, includes many of the emerging economies that have been at the sharp end of the dollar’s surge since Bernanke first signaled in May that the Fed would roll back its bond-buying program.
After a steady week for commodities, gold was flat at $1,286 an ounce while Brent oil held above $108 a barrel, hovering near a three-month high on hopes of a gradual recovery in U.S. demand.
New claims for jobless benefits fell in the world’s biggest economy and factory data improved on Thursday, close on the heels of a steep drawdown in U.S. crude stocks for a third straight week.
Additional reporting by Sudip Kar-Gupta; Editing by Catherine Evans, John Stonestreet