European shares dip as central banks awaited

By Richard Hubbard

LONDON (Reuters) - European shares and the euro eased while German bonds were flat on Wednesday as investors awaited this week's policy decisions by the Bank of Japan and European Central Bank followed by U.S. employment data.

On Thursday the ECB is forecast to leave interest rates unchanged but expectations are high that Japan's central bank will announce a forceful monetary easing to try to boost its recession-bound economy.

The monthly U.S. nonfarm payrolls report on Friday is likely to confirm market views that the Federal Reserve will maintain its extremely accommodative monetary policy, which has underpinned investor sentiment all year.

"People ... are keeping their positions quite tight ahead of central bank meetings and data later this week," Ioan Smith, strategist at Knight Capital, said. "Even though the chances of a surprise may be small, you don't want to be caught the wrong way if there is one."

Before these events European equity markets were taking a breather after their strong gains on Tuesday. The FTSE Eurofirst 300 index of top European shares opened down 0.1 percent, giving back some of the 1.3 percent surge in the previous session.

London's FTSE 100, Paris's CAC-40 and Frankfurt's DAX all opened between 0.1 and 0.5 percent lower after equally strong gains on Tuesday.

Steady U.S. stock futures pointed to a lacklustre Wall Street open after the Standard & Poor's 500 Index neared its all-time high the previous session.

Japan's Nikkei average was the stand out performer, soaring nearly 3 percent as the hopes for easier policy from new BoJ governor Haruhiko Kuroda encourage demand for export-oriented firms.

GERMAN AUCTION

In the debt market German Bund futures were flat at 145.20 as traders await a 4 billion euro sale of five-year bonds later, which analysts expect will attract demand from investors still fretting about Cyprus's messy bailout experience.

"We look for decent demand with markets eyeing a softer ECB this week and see value against (surrounding bonds)," Commerzbank strategists said in a research note.

The yen and the euro were both slightly lower against the dollar before the central bank meetings with the greenback trading around 93.35 yen, off a one-month low of 92.57 yen touched on Tuesday.

The euro eased 0.1 percent to about $1.28 and was struggling to move away from a four-month low of $1.2750 reached last week, as the currency remained pressured by concerns about bailout consequences in Cyprus and weak euro zone economies

Spot gold fell for a second day to hit a one-month low of $1,563.06 an ounce, approaching the 2013 nadir hit on February 21 of $1,554.49, which was a six-month low.

"There is a lack of interest in gold right now and everybody seems to be sitting on the sidelines. Stocks are still looking more attractive for investors than gold," said Yuichi Ikemizu, branch manager at Standard Bank in Tokyo

U.S. crude futures fell 0.6 percent to $96.61 a barrel while Brent eased 0.4 percent to $110.25.

(Additional reporting by Alistair Smout; Editing by David Stamp)