By Ian Chua
LONDON, March 26 (Reuters) - A better-than-expected German
business sentiment report helped lift the euro and European
stocks on Wednesday, but ongoing worries about the world's
biggest economy kept the dollar under pressure.
A weakening greenback helped fuel interest in a range of
commodities such as oil and gold that had sold off recently.
Global demand for many commodities is seen remaining intact
thanks to booming economies such as China despite a softer U.S.
outlook.
German corporate sentiment improved in March as firms took a
more optimistic view of the economic situation, according to a
closely watched report from the Ifo institute, helping lift some
of the gloom surrounding the global economy.
"This is the third consecutive month that the Ifo has come
out on the strong side of expectations," said Audrey Childe
Freeman European economist at CIBC World Markets.
"It sort of backs up a continued decoupling story for
Germany and the euro zone as a whole," she said, adding that it
also supported views that the ECB would not cut rates soon.
The Ifo economic research institute said its business
climate index, based on a poll of around 7,000 firms, rose to
104.8 from 104.1 in February -- easing investors' flight to
safety and knocking safe-haven euro zone government bonds off
early highs.
The report came a day after U.S. consumer confidence fell to
a five-year low in March, while a separate U.S. report revealed
a record drop in home values in January, raising concerns
Americans are tightening their purse strings. [].
The FTSEurofirst 300 <> index of top European shares
pared early losses and briefly popped into positive territory
before edging 0.2 percent lower. Germany's DAX <.DAX> was flat,
while London's FTSE 100 index <> shed 0.3 percent.
Swiss miner Xtrata <XTA.L> was among the biggest losers,
shedding about 9 percent, after takeover talks with the world's
largest iron ore miner Vale <VALE5.SA><RIO.N> broke down.
Just a day earlier, European stocks had risen about 3
percent with banks in the lead after JPMorgan <JPM.N> raised its
offer to buy rival Bear Stearns <BSC.N> five-fold, helping ease
worries about a sector hit by the credit crunch.
In Asia, Japan's Nikkei <> ended down 0.3 percent, but
MSCI's measure of other Asian stock markets <.MIAPJ0000PUS>
added 0.6 percent.
MSCI world equity index <.MIWD00000PUS> edged up 0.2
percent.
DOLLAR SOFTER
The dollar slipped against a basket of major currencies,
struggling amid ongoing concerns about the health of the U.S.
economy.
The dollar index <.DXY> fell 0.6 percent, while the euro
rose half a U.S. cent on the back of the Ifo report to around
$1.5646 <EUR=>.
Among government bonds, the 10-year Bund yield <EU10YT=RR>
was little changed at 3.872 percent, while the benchmark 10-year
yield for U.S. Treasuries <US10YT=RR> lost 2.4 basis points to
3.517 percent.
U.S. light crude for May delivery <CLc1> climbed 73 cents to
$101.94, while gold <XAU=> edged up to $940.50 an ounce from
around $934.60 an ounce late in New York on Tuesday.
(Editing by Mike Peacock)
