* Euro, stocks hit by profit taking
* Bunds up; Italy auction due
* U.S. Q4 GDP numbers eyed
By Simon Jessop
LONDON, Jan 28 (Reuters) -The euro's rally against the
dollar faltered on Friday and stocks opened weaker ahead of U.S.
fourth-quarter GDP numbers on profit taking, although both look
set to end the week in the black.
The euro <EUR=> was down 0.3 percent verses the dollar by
0846 GMT, also giving back some of its gains against the yen
<JPY=> following Thursday's sell-off after Standard & Poors cut
Japan's sovereign credit rating.
More broadly, however, the single currency remains supported
by the European Central Bank's hawkish tone on interest rates,
Tom Levinson, currency strategist at ING, said, with markets
pricing in more than one 25 basis point hike by year-end.
"Barring a nasty return of sovereign-debt related concern
(still likely at some point), the likelihood of the ECB leading
the Fed by some distance in its tightening cycle suggests
EUR/USD can rise further," he added.
Elsewhere, the dollar gained slightly against a basket of
major currencies <.DXY>, up 0.2 percent.
Stocks also opened lower in Europe and by 0846 GMT, the
benchmark FTSEurofirst 300 index <> of leading European
shares was down 0.4 percent, led by mining stocks, although it
remains up 0.2 percent on the week.
"We expect equity markets to move into a consolidation phase
in the next couple of months," said Tammo Greetfeld, equity
strategist at UniCredit.
"People are waiting for the U.S. GDP figures, but it would
only move the market in a big way if the figures significantly
deviate from the consensus."
The weakness in European shares continued a broad-based
sell-off in Asia overnight, with Japanese stocks hit by the
previous day's S&P sovereign downgrade and other indices by
inflation concerns.
In Asia, Japan's Nikkei average <> ended down 1.1
percent, while the MSCI world equity index <.MIWD00000PUS> and
Thomson Reuters global stock index <.TRXFLDGLPU> were both
trading down 0.4 percent by 0850 GMT.
Emerging market stocks <.MSCIEF> fared even worse, however,
down 0.7 percent.
The pace of economic recovery in the United States, efforts
to stem the euro zone debt crisis and concerns about building
inflationary pressures continue to guide markets across the
region against the backdrop of the quarterly earnings season.
Fourth quarter U.S. GDP numbers, due out at 1330 GMT, are
expected to show the world's biggest economy posted the best
quarterly growth since the first quarter of last year, although
unemployment is seen stubbornly high. []
The data should provide direction across markets later in
the session, after U.S. housing and factory data out on Thursday
pointed to a steady economic recovery. []
BUNDS UP, ITALY EYED
Bund futures <FGBLc1> rose in early trade, tracking U.S.
Treasuries, with traders eyeing the U.S. GDP figures as well as
an auction of Italian debt later in the session.
Rome plans to auction up to 6.75 billion euros of 2- and
10-year notes later on Friday, and a healthy bid would reiterate
the market's willingness to accept more peripheral euro zone
debt.
"Italian supply and U.S. GDP are the pick of the day today,"
a trader said. "Demand at the Italian auction should be
reasonable. The market may get some concession built in but the
bonds are pretty cheap in that part of the curve."
U.S. Treasuries had traded steady overnight in Asia.
Elsewhere, spot gold <XAU=> slumped to a four-month low as
safe-haven flows waned in the face of the improving U.S.
economic outlook, while benchmark crude oil <CLc1> traded flat.
(Editing by Toby Chopra)
