(Updates prices, adds comments)
By Ian Chua
LONDON, March 26 (Reuters) - Concerns about the U.S. economy
and banking sector woes gnawed at investor confidence on
Wednesday despite a better-than-expected German business
sentiment report, keeping stocks and the dollar under pressure.
But a weakening greenback helped fuel interest in a range of
commodities including oil, gold and industrial metals that had
sold off recently.
A Deutsche Bank <DBKGn.DE> warning that credit market
aftershocks could hit its 2008 profits and data on Tuesday
showing U.S. consumer confidence dropping to a five-year low in
March conspired to keep investors cautious.
Adding to the gloom, fresh U.S. data on Wednesday showed new
orders for long-lasting U.S. manufactured goods unexpectedly
fell 1.7 percent in February, reinforcing worries about the
world's biggest economy.
Wall Street looked set to open lower with major stock index
futures <SPc1><DJc1><NDc1> all trading in the red.
"There definitely is still nervousness in the banking sector
and the announcement from Deutsche bank served as a reminder
that JPMorgan raising its bid for Bear Stearns doesn't
necessarily solve all the problems for the financial sector,"
said Sean Maloney, fixed-income strategist at Nomura in London.
News early this week that JPMorgan <JPM.N> had boosted its
takeover offer for Bear Stearns <BSC.N> by about fivefold had
sparked a rally in financial stocks globally and eased worries
about a sector constrained by a credit crunch.
The FTSEurofirst 300 <> index of top European shares
slid 0.9 percent, while Germany's DAX <.DAX> fell 0.7 percent
with Deutsche Bank <DBKGn.DE> about 2 percent lower.
London's FTSE 100 index <> shed 0.7 percent, weighed by
a near 7 percent fall for Swiss miner Xtrata <XTA.L> after
takeover talks with the world's largest iron ore miner Vale
<VALE5.SA><RIO.N> broke down.
Earlier in Asia, Japan's Nikkei <> ended down 0.3
percent, but MSCI's measure of other Asian stock markets
<.MIAPJ0000PUS> climbed 0.7 percent.
MSCI's main world equity index <.MIWD00000PUS> nudged 0.2
percent higher.
DOLLAR DOWN, COMMODITIES UP
The dollar slipped against a basket of major currencies,
with the dollar index <.DXY> falling 0.8 percent amid ongoing
concerns about the health of the U.S. economy.
In contrast, upbeat data showing the German business climate
index, based on a poll of around 7,000 firms, rose to a
better-than-expected 104.8 from 104.1 in February helped drive
the euro higher.
The euro rose about 0.7 percent on the day to $1.5736
<EUR=>, further boosted by comments from European Central Bank
Jean-Claude Trichet, which markets interpreted as suggesting no
interest rate cuts were imminent.
Testifying before an economic committee of the European
Parliament, Trichet said the ECB believed the current monetary
policy stance will contribute to achieving price stability in
the medium term.
Among commodities, U.S. light crude for May delivery <CLc1>
climbed $1.25 to $102.47, while gold <XAU=> rose to $947.70 an
ounce from around $934.60 an ounce late in New York on Tuesday.
Copper for three-month delivery <MCU3> on the London Metal
Exchange last traded at $8,155/tonne, up 0.8 percent.
Global demand for many commodities is seen remaining intact
thanks to booming economies such as China despite a gloomy U.S.
outlook.
"The dollar's fall has prompted buying but traders are
reluctant to take large positions ahead of the end of the
quarter," said Shuji Sugata, a manager at Mitsubishi Corp
Futures and Securities Ltd in Tokyo.
Underlying concerns about the U.S. economy underpinned
demand for safe-haven U.S. Treasuries with the benchmark 10-year
yield <US10YT=RR> slipping about 5 basis points to 3.457
percent.
But German 10-year bonds <EU10YT=RR> underperformed their
U.S. counterparts, weighed by Trichet's comments as well as
fresh bond supply. The 10-year yield was little changed at 3.887
percent.
