LONDON, (Reuters):
SUMMER DOLDRUMS and questions about the direction of the global economy put financial markets in a drifting mode on Monday with the dollar mixed, European shares weak and bonds flat.
Wall Street looked set for a higher start, but investors remained uncertain about the extent of an expected slowdown in the world economy and its impact on financial markets.
No major U.S. data releases were scheduled for Monday to give any direction and Japan's stock market was closed for the Marine Day national holiday.
"Everyone is waiting for various things, but no one is quite sure what," said Nigel Cobby, managing director of European equities at J.P. Morgan.
The dollar was among the main movers on a quiet trading day, generally weakened by a series of U.S. reports on Friday that cutback expectations of interest rate hikes.
"Economic numbers have been weaker than the market had anticipated and the environment for rapid U.S. rate hikes has been scaled down," said Mark McFarland, currency strategist at UBS in London.
"Investment flows supporting the dollar have diminished in size and the potential for U.S. growth is weaker."
Despite this, the dollar recovered slightly against the euro and was up about a quarter of a percent at $1.2419. It fell about the same against the yen to 108.42 yen.
STOCKS AND BONDS
European shares fell to near two-month lows with a thin corporate menu and dwindling investor appetite for new issues.
The FTSE Eurotop 300 index was down 0.27 percent and the DJ Euro STOXX was off 0.5 percent.
The pan-European 300 share index has fallen 4 percent in less than a month with investors worrying that growth in corporate earnings may have peaked as interest rates head higher.
"Overall, the earnings trend is still okay but growth is expected to be moderate from here on," said Bert Jansen, European strategist at Exane BNP Paribas in Paris.
"This is clearly one of the worries and the reason why the market is not making any headway," he said.
Euro zone government bond yields were flat to lower in quiet trade.
The German June PPI rose by 1.5 percent year-on-year compared with a median forecast in a Reuters poll for a 1.6 percent rise.
"The prices data puts paid to the grim view that German inflation was about to spiral up and push up euro zone prices," said a trader in London. "A bit of profit-taking is taking the shine off but nothing dramatic."
