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GLOBAL MARKETS-Euro ticks up, Asian shares fall on growth fears

Published 06/07/2011, 02:10 AM
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SINGAPORE, June 7 (Reuters) - * Euro edges up after overnight slide on valuation concerns

* Shares extend losses, Fed officials say data disappointing

* Greece aid, extent of global slowdown major uncertainties

* Aussie dollar slips as c.bank sounds guarded on tightening

By Daniel Magnowski

SINGAPORE, June 7 (Reuters) - The euro ticked up in Asia on Tuesday, steadying from a slide after the Eurogroup chairman said the common currency was overvalued, while Asian stocks fell for a fourth day on worries about slowing global growth.

European stocks were expected to lose ground for the fifth session in a row after the S&P index shed 1.1 percent overnight, hitting its lowest level since mid-March.

The euro came under pressure on Monday after Jean-Claude Juncker, chairman of the Eurogroup, made his comment about valuation and a spokesman for the German finance ministry said a second aid program for debt-laden Greece was not certain. [ID:nLDE7550KZ}

"Those comments (from Juncker) probably weighed on the euro at the margin. But the direction of a weaker dollar is pretty clear this point in time, so I'm expecting a bounce in the euro," said Richard Grace, chief currency strategist at Commonwealth Bank.

The euro traded at $1.4606 at 0538 GMT on Tuesday, having fallen as low as $1.4555.

The single currency has gained more than 4 percent since climbing from its May 23 trough versus the dollar. Despite fears that Greece will eventually default on its debt, the euro is being supported by persistent U.S. dollar weakness and expectations that the European Central Bank will signal a July interest rate rise at its policy meeting on Thursday.

The dollar slipped 0.2 percent against a basket of major currencies on Tuesday.

Investors will be closely following a speech by Federal Reserve Chairman Ben Bernanke at 1945 GMT for more clues on the U.S. central bank's view of the slowdown and its impact, if any, on the Fed's exit from its extremely easy monetary policy.

The Nikkei average rose 0.7 percent to 9,444 points as short covering of utilities and some bargain-hunting offset selling on fears that U.S. growth may be stalling, analysts said.

"When the Nikkei trades below 9,400 institutional investors buy global cyclical shares as a long-term investment and retail investors tend to buy defensive shares with high dividend yields, such as drugmakers," said Fujio Ando, a senior managing director at Chibagin Asset Management.

MSCI's index of Asia-Pacific stocks outside of Japan index fell 0.4 percent, with consumer discretionary and resources shares giving up the most ground on concerns that global demand is cooling.

Technical indicators suggest further declines may be on the horizon, analysts at Barclays Capital said in a research note.

"Various topping patterns in equity markets from different regions suggest the risk of an ongoing corrective pullback in equity markets over the summer," they said.

Brent crude oil for July delivery fell 60 cents to $113.88 a barrel , extending Monday's fall when it closed at its lowest in two weeks, on expectations that OPEC will raise production targets when it meets this week.

U.S. gasoline prices fell for the fourth week in a row last week as crude prices recoiled, relieving some pressure on consumers and reinforcing the views of some economists that the current economic "soft patch" will be temporary.

U.S. retail sales reports due later in the day may signal whether lower fuel prices enticed shoppers back into the stores in recent weeks.

Gold was around $1.50 higher at $1,544.65 per ounce by 0535 GMT, after closing at $1,543.05 on Monday. Gold, one of the chief beneficiaries of worries about the security of currencies and other assets, set a record high of $1,575.79 per ounce in early May.

The Australian dollar , the world's fifth-most traded currency, fell below $1.0700 after the Reserve Bank of Australia held rates steady at 4.75 percent, as widely expected. The Aussie was trading around $1.0745 before the decision.

Markets had been expecting it to repeat an earlier warning that rates would likely have to rise in the next few months in order to put a lid on price pressures, but no such indication was given, prompting some economists to push back their expectations on the timing of the next rate rise to August.

* For Reuters Global Investing Blog, click on

http://blogs.reuters.com/globalinvesting

* For the MacroScope Blog, click on

http://blogs.reuters.com/macroscope

* For Hedge Fund Blog, click on

http://blogs.reuters.com/hedgehub (Reporting by Ian Chua in Sydney and Ayai Tomisawa in Tokyo; Editing by Kim Coghill)

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