(Updates prices, adds comments)
By Ian Chua
LONDON, Feb 13 (Reuters) - Caution ahead of key U.S. retail
sales data on Wednesday prompted investors to pare some gains in
stocks while tough talk on inflation by the Bank of England
helped boost sterling.
Though rising off early lows, stocks were still in the red
with investors taking risky bets off the table in case the U.S.
report, due at 1330 GMT, showed more weakness in the world's
biggest economy than already anticipated.
A weakening consumer sector, which accounts for more than
two thirds of the U.S. economy, has fuelled concerns that a
recession is increasingly likely.
Also worrying was fresh data showing much weaker than
expected euro zone industrial output in December -- another sign
of a global slowdown. []
"Euro zone growth is in trouble and the ECB had better get
its skates on for easing soon," said David Brown, chief European
economist at Bear Sterns International.
U.S. stock index futures were up a touch ahead of the retail
sales data, which will set the scene for U.S. Federal Reserve
Chairman Ben Bernanke's congressional testimony on Thursday.
Tuesday's news that billionaire investor Warren Buffett had
offered to reinsure $800 billion in municipal debt guaranteed by
bond insurers had helped to soothe worries about further fallout
from the credit crisis, although doubts have started to creep
in.
The FTSEurofirst 300 <> index of top European shares,
which jumped 3.4 percent on Tuesday, fell 0.7 percent, with
Germany's DAX <> down 0.7 percent and Britain's FTSE 100
<> shedding 1.2 percent.
"The market really doesn't have any conviction. There is so
much uncertainty out there," said Dirk Thiels, head of global
equity funds at KBC Asset Management.
MSCI's main world equity index <.MIWD00000PUS> fell 0.3
percent. Earlier, Japan's Nikkei <> edged up just 0.4
percent, while MSCI's measure of other Asian stock markets
<.MIAPJ0000PUS> slipped 0.2 percent.
STERLING RISES
Sterling erased losses against the dollar to be up 0.1
percent at a one-week high of $1.9634 <GBP=> after the Bank of
England (BoE) quarterly inflation report signalled that rates
would be eased only modestly. []
"If there is one thing we can take away from the Feb
inflation report, it is that the BoE is trying to tell us that
interest rates are not going to fall as much and as quickly as
the market assumes," said Jodie Tiller, an economist at CIBC.
The dollar edged up 0.3 percent to 107.59 yen <JPY=>, while
the euro was 0.2 percent higher at 156.90 yen <EURJPY=>, both
also reversing from early losses. Against the dollar, the common
currency was flat at $1.4579 <EUR=>.
Euro zone government bond futures pared early gains as
stocks climbed off the session lows. The March Bund future
<FGBLH8> put on just 12 ticks to 116.59, while the 2-year Bund
yield <EU2YT=RR> edged up to 3.14 percent.
Among commodities, U.S. crude <CLc1> was little changed just
below $93 a barrel, remaining subdued after a three-session
rally fizzled out on Tuesday. Copper <MCU3> fell around 2
percent as Chinese buyers, returning to the market after the
lunar New Year holidays, proved unwilling to push prices higher.
