By Ian Chua
LONDON, March 31 (Reuters) - European shares were on track
for their third straight quarterly loss on Monday beset by
unrelenting worries about the financial sector while fiscal
year-end demand from Japanese corporates helped prop up the
ailing dollar.
Underscoring tight credit conditions, particularly into the
end of the month and quarter, the European Central Bank
announced it would inject extra overnight funds to money
markets.
In contrast, commodities such as copper were headed for
their strongest quarterly performance in at least 18 months with
demand seen largely remaining intact despite worries about
global growth.
Copper futures in London <MCU3=LX> gained 0.9 percent.
Investors dumped bank shares on renewed fears over asset
writedowns and after Oppenheimer & Co analyst Meredith Whitney
warned last Friday of more dividend cuts and forecast a further
25 percent drop in U.S. banking shares.
Swiss bank UBS <UBSN.VX> dropped more than 3 percent.
"This subprime crisis isn't over yet and we might see more
writedowns from banks when they report their first quarter
results, and that obviously is entangling stock markets," said
Franz Wenzel, strategist at AXA Investment Managers in Paris.
Suggesting heightened risk aversion, the iTraxx Crossover
index <ITCRS5EA=GFI>, made up of 50 mostly "junk"-rated credits,
widened about 18 points.
The FTSEurofirst 300 <> index of top European shares
fell nearly 2 percent, with Germany's DAX <> and Britain's
FTSE <> both also down nearly 2 percent.
"Europe Equity Funds have now posted outflows in 29 of the
past 30 weeks," said fund tracker EPFR Global.
"Investors are also betting that European banks lag their
U.S. counterparts in identifying, admitting to and dealing with
the bad debt spawned by the U.S. sub-prime mortgage market."
In Asia, shares posted their worst quarterly performance in
over five years. Japan's Nikkei <> slid 2.3 percent
finishing the fiscal year with its worst quarterly performance
since 2001. MSCI's measure of other Asian stock markets
<.MIAPJ0000PUS> fell 1 percent.
MSCI world equity index <.MIWD00000PUS> lost 0.8 percent.
DOLLAR EDGES UP
The dollar firmed against a basket of major currencies,
drawing support from strong quarter-end demand, but it held near
a record low against the euro as investors awaited more clues on
the health of the U.S economy from data due later this week.
Year-end activity from Japanese investors and corporates and
life insurers gave the dollar a slight lift, traders said.
"The focus on U.S. data will confirm whether the downtrend
is accelerating or not and what the reaction of the Fed could be
on the back of such data," said Michael Klawitter, currency
strategist at Dresdner Kleinwort in Frankfurt.
"Current levels present clear (dollar) selling opportunities
and I'd be very surprised if we now see the dollar stabilising
or recovering from these levels."
The dollar index <.DXY> nudged up 0.1 percent to 71.659. The
euro was little changed at $1.5800 <EUR=> while the dollar
gained 0.2 percent to 99.35 yen <JPY=>.
Among other commodities, U.S. crude <CLc1> slipped 44 cents
to $105.18 a barrel, dragged lower by the restart of a crude
pipeline system in Iraq, while gold edged up towards $940 an
ounce, held back by the fall in oil prices.
Weakness in stocks helped underpin demand for safe-haven
government bonds, pushing yields lower. The 10-year Bund yield
<EU10YT=RR> shed 2.4 basis points to 3.920 percent, while the
benchmark 10-year yield for U.S. Treasuries <US10YT=RR> was
steady at 3.473 percent.
(Additional reporting by Blaise Robinson in Paris and Simon
Falush in London)
