* Dollar at 16-month low
* Stocks weaker despite corporate activity
* Japan's Tankan points to supply chain problems
By Jeremy Gaunt, European Investment Correspondent
LONDON, April 14 (Reuters) - The dollar sank to a 16-month
low against a basket of currencies on Thursday as investors bet
U.S. monetary policy would continue to be loose, while a report
that Chinese inflation will rise dragged on equities.
World stocks <.MIWD00000PUS> were flat to lower despite a
burst of corporate activity that would usually lift investors'
spirits.
Glencore [], the world's largest commodities trading
company, plans to raise up to $12.1 billion in a London and Hong
Kong stock market floatation that is London's biggest ever.
Shares in Japan's Isuzu Motors <7202.T> jumped on a report that
Volkswagen <VOWG.DE> was considering buying all or part of it.
But European shares, as measured by the FTSEurofirst 300
<> were down a half a percent, partly out of concern that
Chinese inflation is returning.
Hong Kong's Phoenix TV, citing an unnamed source, said
China's annual rate of inflation in March was likely to be
5.3-5.4 percent, a 32-month high and just above an estimate in a
Reuters poll. []
Investors are particularly concerned about Chinese inflation
in case government attempts to restrain it prompt a so-called
hard landing for the economy.
"Inflation in emerging economies has become a serious issue,
as the impact from high commodity prices is stronger for those
countries," said Arnaud Scarpaci, fund manager at Paris-based
Agilis Gestion.
Earlier, Nikkei benchmark <> closed up 0.1 percent,
held back by continued worries about the impact of its
earthquake, tsunami and nuclear disasters.
The Reuters Tankan survey of 400 large firms found on
Thursday that power shortages caused by the crippled Fukushima
nuclear plant had hit nearly 60 percent of local companies,
disrupting production and supply chains. []
WEAK DOLLAR
Wednesday's U.S. retail sales data and the Federal Reserve's
Beige Book report did nothing to change the view the U.S.
central bank would stick with its $600 billion asset buying
programme until June.
The European Central Bank, for example, has already raised
interest rates and is expected to do so again, widening the
premium for holding euros rather than dollars. Other economies
are already much further on in raising rates.
The dollar index <.DXY>, which measures its strength against
major currencies, fell around 0.4 percent, bringing its losses
this year to around 5.5 percent.
The dollar fell as low as 83.20 yen <JPY=>, moving away from
its 6-1/2 month high around 85.55 set last week. The euro <EUR=>
was up 0.4 percent at $1.4496.
German government bond futures opened higher, holding onto
modest gains made late in the previous session when U.S. debt
prices rose on news of President Barak Obama's deficit-tackling
plans.
"The (Obama) plan made the right sort of noises and the
equities didn't really move overnight so we're hanging on to
last night's gains at the moment," a trader said.
(Additional reporting by Blaise Robinson, Natsuko Waki and
William James; editing by Patrick Graham)
