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GLOBAL MARKETS-Dollar, European shares slip after rally

Published 08/10/2009, 04:08 AM
Updated 08/10/2009, 04:12 AM
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* MSCI world equity index steady at 270.59

* European stocks, dollar slip after post-jobs data rally

* Oil rises

By Natsuko Waki

LONDON, Aug 10 (Reuters) - The dollar and European stocks slipped on Monday after a strong performance last week following better-than-expected U.S. jobs data, while Tokyo shares hit a 10-month closing high.

Investors are reluctant to add significant risk to their portfolio after a broad-based rally on Friday following the U.S. jobs report for July, which gave a clear indication that the economy is turning around from a deep recession.

They are also waiting for the outcome of the Federal Reserve' monetary policy meeting later in the week.

After the U.S. unemployment rate fell in July for the first time in 15 months, bets on the central bank raising interest rates from 0-0.25 percent by the year-end increased to as high as a 46 percent chance from 34 percent shortly before the data.

"We had a big move on Friday, so we'll be seeing some consolidation today," said Martin McMahon, currency strategist at Credit Suisse in Frankfurt.

"The Fed is the big question later in the week ... Do they extend their buy-back programme or not? If they do, there could be a potentially big impact on the dollar (downwards), and if they don't, it could go the other way." MSCI world equity index was up 0.1 percent, after hitting its highest level since October on Friday.

The benchmark index has climbed for four weeks in a row, rising 1.7 percent the previous week, and is up 19 percent since the start of the year.

The FTSEurofirst 300 index fell 0.4 percent, dragged lower by auto and basic resource shares.

In Tokyo, the Nikkei average hit its highest close in 10 months. Japan's machinery orders, a leading indicator of capital spending, rose in June for the first time in four months.

Emerging stocks rose 0.5 percent.

The dollar was down 0.15 percent against a basket of major currencies. The U.S. currency fell 0.3 percent to 97.34 yen.

The dollar has tended to fall after upbeat economic data, although that dynamic could be changing as the market speculates that interest rates could rise sooner than expected.

U.S. crude oil rose a quarter percent to $71.09 a barrel.

The September Bund future was steady with investors bracing for hefty U.S. and euro zone issuance this week skewed towards 10-year maturities.

The U.S. Treasury will auction $75 billion in new government bonds while Germany is due to issue 6 billion euros of the benchmark 10-year paper on Wednesday. (Additional reporting by Naomi Tajitsu, editing by Mike Peacock)

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