By Marc Jones
LONDON (Reuters) - A three-day worldwide stocks rally was threatening to stall on Wednesday, as investors waited for a meeting between U.S. President Donald Trump and the President of the European Commission to see where the global trade war was heading next.
Asian stocks had inched up overnight after Wall Street had hit a five-month high, extending a month-long advance, but tech and commodity stocks Europe <0#.INDEXE> eased early on (EU) as the market's focus returned to what may happen with tariffs.
EU trade commissioner Cecilia Malmstrom told a Swedish newspaper on Wednesday that the bloc was preparing to introduce tariffs on $20 billion of U.S. goods if Washington imposes levies on imported cars.
A monthly survey of German business confidence also showed some impact from the row, although there was no major plunge and traders in most markets seemed content to hold positions steady.
China's yuan had eased off a 13-month low (SS) which also soothed some nerves, while most major currencies [FRX/], bond benchmarks [GVD/EUR] and oil [O/R] were tucked in tight ranges.
"We have seen a lot of complacency over this entire trade war so the question is, unless we see a very negative outcome (from the EU-U.S. meeting), are we going to see a marked reaction?" Rabobank strategist Bas Van Geffen said.
"It is an odd one where two key trade partners, but also two key allies, are now fighting each other."
With another blizzard of multinational corporate earnings, a European Central Bank meeting and U.S. GDP figures still to come this week, there was plenty of scope for volatility.
The dollar index, which measures the greenback against a basket of six other major currencies (DXY), was just off a two-week low at 94.506 and barely budged at $1.1692 against the euro (EUR=EBS) and 111.24 yen.
The yield on the 10-year Treasury note, which tends to act as the benchmark for global borrowing costs (US10YT=RR), eased to 2.937 percent, after climbing to a six-week peak of 2.973 percent overnight.
Bond yields have been pushed up this week on speculation the Bank of Japan is edging closer to unwinding its aggressive stimulus programme.
But with the Thursday's ECB meeting looming, most bond yields in the euro area also edged down on Wednesday. [GVD/EUR]
TALKING TURKEY
Britain's pound nudged up to $1.3150
Turkey's lira
State Street Global Advisors currency portfolio manager Aaron Hurd said the worry is that President Tayyip Erdogan's government will put pressure on the central bank to keep rates down, fuelling what it already double-digit inflation.
"The new (finance) minister and the new cabinet in total is an unknown quantity and we have to wait and see and learn how to interpret their behaviors," Hurd said. "That means an even higher risk premium priced into the currency."
The decline in China's yuan paused for the time being also. The currency was a shade firmer at 6.797 per dollar
The Shanghai Composite Index (SSEC) closed fractionally lower after brushing a one-month high and enjoying a roughly 3-percent surge this week. (SS)
Tokyo's Nikkei (N225) ended 0.5 percent higher, Hong Kong's Hang Seng (HSI) climbed 0.9 percent and, though South Korea's KOSPI (KS11) lost 0.4 percent, MSCI's broadest index of Asia-Pacific shares (MIAPJ0000PUS) gained 0.4 percent.
Those moves came after Wall Street's S&P 500 (SPX) closed at its highest level since the start of February as Google's (O:GOOGL) blowout results bolstered what has already been a bumper U.S. earnings season. (N)
In commodities, Brent crude futures (LCOc1) were up 0.6 percent at $73.89 a barrel, adding to the previous day's gains as market focus shifted away from oversupply concerns to the possibility of increasing Chinese demand. [O/R]
Copper on the London Metal Exchange (LME) traded down at $6,264 per tonne
Iron ore on the Dalian Commodity Exchange