LONDON (AFP) – London shares edged lower on Wednesday following gains in the previous session as investors awaited earnings results from blue-chip companies and key economic growth figures.
The benchmark FTSE 100 index slipped 0.16 percent to 6,059.96 points in early deals.
Economic growth figures will be published later, which is expected to show a rise in GDP in the first quarter, with some economists forecasting 0.5 percent growth.
The market had closed up on Tuesday at 6,069.36 points -- its highest level in over two months -- boosted by advances on Wall Street based on strong earnings by top US firms.
Meanwhile Tokyo gained 1.39 percent overnight, with the Nikkei up 133.15 points to 9,691.84.
HONG KONG (Reuters) – The U.S. dollar plumbed a near 3-year low against other major currencies on Wednesday before a Federal Reserve decision, which is expected to reinforce an ultra-easy policy stance and drive more capital to buoyant emerging Asian stock markets.
While Fed chairman Ben Bernanke is expected to paint a cautious picture on the world's largest economy, Asian and Latin American central banks by contrast are still tightening monetary policy and some are using currency appreciation to check price pressures.
The European Central Bank raised its policy rate this month for the first time since mid-2008 and is expected to raise rates at least once more this year.
That has given new legs to the "carry trade", in which investors borrow in a low-yielding currency to invest in higher-yielding assets or currencies.
Investors have been snapping up the high-yielding Australian dollar and South Korean shares (.KS11), while showing heavy interest in Indonesia's upcoming dollar bond.
Market players also added to bearish dollar bets, especially against the euro and the Swiss Franc, on expectations the Fed will cling to a near-zero interest rate policy even as it lets a $600 billion bond purchase program wind down in June.
"Focus will be on the inaugural press conference and whether Bernanke is shifting along the dove-hawk scale," said Michael Sneyd, analyst at Societe Generale.
"Attention will also be on comments for how the Fed may respond to U.S. fiscal tightening. All-in-all, the meeting is likely to give the green light for risk appetite and for dollar bears to continue to be bearish."
The dollar index (.DXY), which tracks its performance against a basket of major currencies, hit the lowest since August 2008 at 73.483, before cutting some losses.
FLOWS PICK UP
Asian shares rose after robust gains posted by U.S. indices overnight, driven by better-than-expected performances from U.S. corporate heavyweights. U.S. stock futures rose 0.1 percent, suggesting a higher open on Wall Street.
South Korea's benchmark KOSPI index (.KSII) rose to a record high for the third consecutive session before giving back some gains as investors took profits on automaker shares. It ended flat. Hong Kong shares (.HSI) rose, boosted by a broad rally in financials ahead of results from Chinese banks.
MSCI's index of Asia Pacific shares outside Japan (.MIAPJ0000PUS) rose to its highest level since January 2008, and was up 0.5 percent on the day.
Japan's Nikkei (.N225) closed up 1.4 percent, supported by rebounding shares of large exporters. But it could face downward pressure after ratings agency Standard & Poor's revised its outlook on Japan's sovereign debt to negative.
Offshore flows into non-developed Asian markets have picked up after a January slump, with both emerging markets equity and bond fund groups extending their longest inflow streaks since mid-January, according to fund tracker EPFR Global.
The order book for Indonesia's eagerly awaited 10-year dollar-denominated bond has grown to around $5 billion for an issue expected to be between $1 billion to $1.5 billion in size, IFR said. Indonesia's markets have been a favorite among global investors because of the country's relatively high yields, decent economic growth and demographics.
China let the yuan rise to a post-2005 revaluation high, triggering gains in emerging Asian currencies.
Helping the case of carry trades, the Australian dollar shot to a new 29-year peak above the $1.0800 per U.S. dollar after higher-than-expected first quarter inflation suggested the central bank will eventually have to resume tightening.
The dollar's woes have been further compounded by a recent drop in U.S. Treasury yields as rate traders bet that any Fed tightening would be a slow and gradual process.
In Asian time, the U.S. 10-year note yield was at 3.32 percent, just above a one-month low of 3.31 percent before the Fed decision. Ten-year yields are down by about 30 basis points since this month's highs.
In commodity markets, spot silver bounced 0.9 percent to around $46 per ounce level after falling by nearly 5 percent overnight. High volatility and the expiry of U.S. silver options added to the intensity of the decline of the precious metal.
Despite the sharp pullback in silver which rippled over into other commodities, Brent held above the $124 per barrel line, as Libya's civil war and violence-tinged unrest Syria and Yemen helped limit bearish sentiment on a price slide.
EL-ARISH, Egypt – An explosion rocked a natural gas terminal near Egypt's border with Israel early on Wednesday, sending flames shooting into the air and forcing the shutdown of the country's export pipeline, said security officials.
It was the second incident in the past month on the al-Sabil terminal near the town of El-Arish just 30 miles (50 kilometers) from the border with Israel. On March 27 gunmen planted explosives at the terminal, which failed to detonate.
The valves controlling the flow of gas from the main terminal in Port Said on the Mediterranean coast were shut down to stifle the flames, cutting gas exports to Israel, Jordan and Syria. The fire continued to rage well past dawn.
Maya Etzioni, a spokeswoman for Israel's Infrastructure Ministry, confirmed that the gas supply was cut off early Wednesday.
Egyptian officials, who spoke on condition of anonymity because they were not authorized to speak to the media, did not say if explosion was due to sabotage or an accident.
Bedouin tribesmen in the area have attacked the pipeline in the past, including on Feb. 5, when a different section was blown up, stopping exports to Israel and Jordan for a month. They also attempted to sabotage the pipeline in July 2010.
Security forces often clash with the Bedouin in the Sinai Peninsula, who complain of being neglected and oppressed by the central government. Tribesmen attempt to draw attention to their grievances by blocking roads, burning tires, or attacking infrastructure.
On Tuesday, the state news agency reported that the main highway in the area was temporarily closed by protesting families of detainees before the army reopened it. Following attacks by militants on resorts in the southern Sinai between 2004 and 2006, thousands of Bedouin were detained, increasing local resentment of the central government.
Egypt exports gas to Israel, Jordan and Syria, though lately the deals have come under attack because of the low price at which the gas is sold and on April 13, the prime minister ordered a review of the pricing deals.
Danny Yatom, a former head of the Mossad intelligence service, said Israel could no longer depend on a stable supply of gas from Egypt and needed to speed up the development of its own offshore gas reserves.
"We need to understand that this is a problem we're going to live with for a very long time, and we need to start preparing an alternative now," Yatom told Army Radio.
Jordan depends on Egyptian gas to generate 80 percent of its electricity. The halt to the flow would force the country to rely on more expensive diesel fuel to keep the country's power plants running.
Egypt has potential natural gas reserves of 62 trillion cubic feet (1.7 trillion cubic meters), the 18th largest in the world.
Associated Press writer Matti Friedman contributed to this report from Jerusalem.