*Stocks weaker on China, earnings
* Dollar slips
* Wall Street set to open flat to higher
By Jeremy Gaunt, European Investment Correspondent
LONDON, Jan 13 (Reuters) - China's monetary tightening and
disappointing corporate earnings put downward pressure on world
stocks on Wednesday, combining to present investors with two of
their biggest concerns.
The dollar fell. European shares were flat, held up
primarily due to demand for defensive stocks. Wall Street looked
set to open flat to slightly higher.
Heading into the new year, investors have been concerned
about the impact on markets from the eventual withdrawal of
liquidity in major economies.
China in effect tightened monetary policy on Tuesday by
raising banks' reserve requirements, with an eye towards reining
in surging asset prices. []
At the same time investors are seeking confirmation that
improvements in economies and corporate profits are sustainable.
So far in this earnings season, U.S. aluminium giant Alcoa
has disappointed while oil firm Chevron issued a profits
warning. In Europe, French bank Societe Generale <SOGN.PA> said
on Wednesday it was expecting only a "slight profit" for the
fourth quarter of 2009. []
MSCI's all-country world stock index <.MIWD00000PUS> was
down 0.2 percent with its emerging counterpart <.MSCIEF> losing
0.9 percent.
Japan's Nikkei <> earlier lost 1.1 percent.
"Confidence is dissipating quickly. There is a concern that
with such a low level of volume we are setting ourselves up for
a correction," said Justin Urquhart Stewart, director at Seven
Investment Management.
FTSEurofirst 300 <> was up around 0.1 percent.
DOLLAR STRONGER
The dollar reversed earlier gains and the euro rose to hit a
near one-month high, driven higher as Asian central banks were
seen buying the pair.
The euro rose to $1.4578 <EUR=>, its highest since Dec. 16,
2009, according to Reuters data. It was last up 0.5 percent on
the day at $1.4568.
Following China's move, investors initially unwound
positions against currencies such as the commodity-linked
Australian dollar.
"While the move itself was a minor step, it's significant
going forward as China is likely to be more aggressive in
tightening policy, where the near-term impact will be more
downside risks to the 'riskier' currencies," said Lee Hardman,
currency economist at Bank of Tokyo-Mitsubishi UF.
Euro zone government bond yields were higher.
(Additional reporting by Joanne Frearson and Tamawa Desai;
Editing by Ruth Pitchford)
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