* Equities weak, led by emerging markets
* Dollar strengthens
* Investors jumpy about QE, earnings
(Fixes typo in headline)
By Jeremy Gaunt, European Investment Correspondent
LONDON, Oct 18 (Reuters) - Investors pulled back some of
their bets on additional monetary easing by the Federal Reserve,
lifting the dollar and generally selling off equities on Monday.
Emerging market stocks, one of the main beneficiaries of
expectations of more quantitative easing (QE) from the Fed, were
particularly hit.
Wall Street also looked set to open lower.
MSCI's emerging market stock benchmark <.MSCIEF> was down 1
percent on Monday, after hitting a 2-1/2-year high last week.
Its fall helped dragged the MSCI all-country world index
<.MIWD00000PUS> down more than a third of a percent.
Equity markets have been rallying strongly over the past few
weeks as the prospect of more QE asset purchases has increased.
On Friday, Fed Chairman Ben Bernanke confirmed the likelihood of
more easing. []
Monday's market moves were probably motivated in part by a
desire among investors to take some profits from recent rallies
and to adjust positions to reflect slightly more caution,
particular ahead of the U.S. earnings season.
The U.S. earnings reporting period picks up steam this week,
with 109 S&P 500 companies and 11 Dow components due to report.
Among them will be Goldman Sachs <GS.N>, Bank of America
<BAC.N>, Citigroup <C.N> and Morgan Stanley <MS.N>.
"What's behind this is a tug-of-war among views on the
United States implementing additional easing measures. If
earnings results show that U.S. companies are actually
generating strong profits, that would weaken the case for easing
expectations," said Kazutaka Oshima, president of Rakuten
Investment Management in Japan.
The FTSEurofirst 300 <> index of top European shares
bucked the trend, rising 0.1 percent after a gain of 1.4 percent
last week. The benchmark is up more than 67 percent from its
lifetime low of March 2009.
Earlier, Japan's Nikkei <> closed flat.
STRONGER GREENBACK
The U.S. dollar bounced from a 10-month low against a basket
of currencies while the euro continued a retreat from an 8-1/2
month high.
The dollar index <=USD><.DXY> was up half a percent after
losing nearly 5 percent in the past month as investors increased
their QE bets against the dollar.
QE effectively requires the Fed to print more money, thus
increasing supply and keeping interest rates at unattractively
low levels.
"The dollar's move down has been extremely aggressive, and
there are investors wondering whether or not too much
quantitative easing has been priced in or not," said Jane Foley,
senior currency strategist at Rabobank.
"(It) has been sold off in recent weeks but there are plenty
of opportunities to book profits. So I expect it to see some
choppiness ahead of the next Fed meeting in November."
The euro shed 0.6 percent $1.3889 <EUR=>, pulling away from
its highest in more than eight months of $1.4161 hit on trading
platform EBS on Friday.
Euro zone debt was mixed with yields fall slightly on
longer-term bonds <EU10YT-RR>.
(Additional reporting by Anirban Nag; Editing by Hugh Lawson)
