* European shares trade in narrow range as growth concerns
* Euro gains 0.6 pct vs dlr but seen vulnerable to selloff
* Market moves capped by prospect of central bank action
* Oil tops $114 a barrel on growing supply worries
By Richard Hubbard
LONDON, Aug 13 Weak Japanese economic data on
Monday added to evidence the global economy is slowing, but
stocks and currencies moved within narrow ranges as investors
awaited the next steps by the world's major central banks.
U.S. stocks futures were also flat, indicating the S&P 500
index could end a six-day winning streak.
Japan's economy grew just 0.3 percent in April-June from the
first quarter, half as much as expected, as Europe's debt crisis
weighed on export demand and consumer spending began to lose
The numbers followed last week's dismal Chinese trade
figures and data from Germany showing factory output in Europe's
biggest economy had fallen more than expected in June.
"The latest round of global data releases shows that
European activity is the main drag on the global economy at
present," said Jose Wynne, a foreign exchange strategist at
Barclays Capital, in a note.
But with the data not yet bad enough to prompt urgent action
from the big central banks, market reaction was limited.
At 322.43 points, the MSCI world equity index
had barely moved, having risen 1.65 percent last
week, its fourth straight week of gains.
The FTSEurofirst 300 index of top European shares
steadied at 1,099 points, having slipped just 0.1 percent on
Friday, though that ended a two-week surge that had lifted the
index by 8 percent.
"Markets have run up sharply on hopes that central banks
will fire stimulus measures soon, but how soon is now the
question on investors' lips," said Ishaq Siddiqi, a market
strategist at ETX Capital.
CENTRAL BANK SUPPORT
Falls in equities are not only being limited by hopes of
policy easing measures but also by expectations that the ECB
will soon unveil details of its plan to tackle the funding
pressures on peripheral euro zone nations.
ECB President Mario Draghi raised hopes for fresh
intervention two weeks ago when he said the bank was "ready to
do whatever it takes to preserve the euro".
This led to speculation the bank would restart its purchases
of Spanish and Italian debt to reduce their borrowing costs.
However, uncertainty over the timing and details of this aid
But Belgium's ECB member Luc Coene raised concerns over the
weekend that any new wave of purchases could once again take the
pressure off governments to repair their finances.
And German magazine Der Spiegel quoted Finnish Prime
Minister Jyrki Katainen on Sunday as saying Finland remained
opposed to ECB bond-buying.
"There is no coherent message between politicians and
policymakers," said Jeremy Stretch, head of currency strategy at
The euro still managed to inch higher, gaining 0.4 percent
on the day to $1.2335, though it was well below a
one-month high of $1.2444 posted last Monday.
"It's a low-key start to the week ... The market is mindful
of ECB risks (the risk of ECB action) but less concerned than it
was," said Stretch.
GDP DATA EYED
Markets are now waiting for the first estimate of second
quarter growth for the euro area, due on Tuesday, which is
likely to confirm the region is contracting after registering no
growth at all in the first three months of the year.
Although there is widespread recognition that struggling
parts of the 17-country bloc are in for an extended spell of
economic gloom, the speculation is that the latest bout of
turmoil will push even powerhouse Germany back into recession.
German government bond prices - favoured by risk-averse
investors - were slightly easier ahead of the data, with German
10-year yields rising 5 basis points to 1.43
The prospect that the ECB could resume purchases of
short-term Spanish and Italian bonds next month continued to
have a soothing effect on the peripheral euro area debt market.
Spain's 10-year yields eased 8 basis points to 6.87 percent
, while equivalent Italian yields were 3 basis
points lower at 5.87 percent.
However, Italy's one-year borrowing costs inched higher to
2.767 percent at an auction of fresh one-year bills on Monday as
uncertainty over when the ECB will act limited demand.
Evidence of slowing world economic activity would normally
have sent Brent crude futures lower but instead concerns over
supply have kept prices at a three-month high.
North Sea crude production, which underpins the Brent crude
contract, is set to hit a record low. Iranian output has been
curbed by sanctions, and an intensification of debate in Israel
on whether to go to war with Iran over its nuclear work has
added to concern about disruption in Middle East supply.
"The Israeli comments, what you see in Israeli media, is a
concern. A major concern," said Ben Le Brun, a Sydney-based
market analyst at OptionsXpress.
Brent crude hit its highest level since May 4 at
$114.46 a barrel, up $1.29. U.S. oil rose 60 cents to
$93.47 a barrel.
Gold prices rose in line with a slightly firmer U.S. dollar,
with buyers awaiting clearer signals on the next moves from
Steps to boost growth, such as quantitative easing -
essentially money printing to buy bonds - usually help gold by
increasing liquidity, keeping interest rates low and in the
longer run fuelling fears of inflation.
Spot gold was up 0.3 percent at $1,624.10 an ounce,
while U.S. gold futures for August delivery were up $4.00
an ounce at $1,626.80.