The euro, Asian shares and gold
held steady on Wednesday as investors awaited U.S. Federal
Reserve Chairman Ben Bernanke's speech to international central
bankers gathering in Jackson Hole on Friday and a European
Central Bank meeting next week.
Expectations that Hurricane Isaac, which made landfall in
southern Louisiana on Tuesday, would spare Gulf Coast oil
production facilities from significant damage helped bring down
Brent crude prices.
Otherwise, eyes were locked on central banks for any signs
of further monetary easing from the United States, and from
Europe, where the ECB meeting on Sept. 6 is due to discuss new
measures to help European nations hardest hit by the debt
crisis.
A request by Catalonia, Spain's most economically important
region, for the central government to provide a 5 billion euro
rescue to meet financing needs and debt costs has heightened
fears that Spain will need a European bailout.
European equities were expected to start narrowly mixed,
with financial spreadbetters calling London's FTSE 100,
Paris's CAC-40 and Frankfurt's DAX to open
between a 0.2 percent drop and a 0.3 percent gain.
MSCI's broadest index of Asia-Pacific shares outside Japan
inched up 0.2 percent, after hitting a
three-week low on Tuesday, and the Nikkei stock average
gained 0.4 percent after closing at its lowest level in two
weeks.
The euro traded at $1.2557, staying near a seven-week
high of $1.2590 hit last week, and touched an eight-week high
against the Australian dollar at A$1.2123 on optimism
that Europe will take positive steps to tackle its debt crisis.
Spot gold traded at $1,668.45 an ounce, near a 4-1/2
month high of $1,676.45 hit earlier in the week.
Bernanke's speech at Jackson Hole precedes the Fed's Sept.
12-13 policy meeting, and he has used the event in the previous
two years to signal the Fed's easy policy intentions.
But investors have become less certain of getting any policy
hint from Bernanke this week or strong monetary stimulus from
the Fed's meeting next month, as data released over the past
month has generally pointed to a modest U.S. recovery.
"Everybody's waiting, but I think Bernanke and the other
central bankers are limited in what they can do to boost
growth," said Wang Ao-chao, UOB Kay Hian's Shanghai-based head
of research.
Key jobs data due early in September could still revive
expectations for a powerful easing if numbers were weak.
Fed policymakers have not agreed at this point to a new
round of stimulus, Dallas Federal Reserve Bank President Richard
Fisher, a non-voting member on the Fed this year, told Reuters
on Tuesday, saying "Nothing is predestined."
"We don't believe that Bernanke will pre-commit the Fed at
the JH conference (especially given the important upcoming
Payrolls release on 7 September)," Societe Generale said in a
research note. "There is a risk that markets (especially the
equity markets) will react with disappointment."
Optimism that the Fed would soon undertake major
quantitative easing action through a third round of bond buying,
nicknamed QE3, had fuelled market rallies over the past month,
but the growing doubts were evident as the CBOE Volatility index
inched up to close at a four-week high of 16.49 on
Tuesday.
The VIX measures expected volatility in the Standard &
Poor's 500 index over the next 30 days, and its climb
typically accompanies a rise in risk aversion.
MORE HOPEFUL ON EUROPE
In contrast, hopes remained fairly firm for chances that the
European Central Bank will soon unveil measures to ease
borrowing stress in struggling countries and take a step forward
in containing the three-year euro zone debt crisis.
ECB President Mario Draghi cancelled his attendance of
Jackson Hole due to a heavy workload as he gears up for the
bank's critical policy-setting meeting on Sept. 6.
"Markets are expecting the ECB to provide some kind of
details about the bond buying scheme, and (Draghi skipping
Jackson Hole) may imply he is facing some difficulties putting
together the plan," Takao Hattori, senior investment strategist
at Mitsubishi UFJ Morgan Stanley Securities in Tokyo.
Failing to live up to market expectations could undermine
the euro as concerns over Spain's fiscal woes strengthened.
In the oil market, with U.S. crude prices were down
0.3 percent at $96.04 a barrel and Brent eased 0.1
percent at $112.45.
Hurricane Isaac poses the first major test for New Orleans'
multibillion-dollar flood protections put in place after Katrina
devastated the U.S. Gulf Coast seven years ago.
Asian credit markets were also lacklustre, with the spread
on the iTraxx Asia ex-Japan investment-grade index
little changed.
