By Jeremy Gaunt, European Investment Correspondent
LONDON, March 27 (Reuters) - Central banks moved to provide
extra liquidity to stressed markets on Thursday, helping lift
already positive European shares, while the dollar recovered
some strength after a recent battering.
Asian shares were generally lower, hit by new signs that the
U.S. economy is flagging in the form of tumbling orders for
U.S.-made manufacturing goods along with worries about more bank
write-downs after a slew of downgrades on U.S. bank earnings.
But sentiment was lifted in Europe as central banks stepped
in.
The European Central Bank promised publicly to add
additional liquidity if needed as the quarter comes to an end
and the Bank of England and Swiss National Bank operated in the
markets to try to get interbank lending rates down.
"It seems to be the same old story - there's a scramble for
cash at the moment," said a trader in Dublin.
Buoyant earnings in Europe were already boosting sentiment
with better-than-expected results from Swedish fashion giant
Hennes & Mauritz <HMb.ST> and from insurer Swiss Life <SLHN.VX>
supported buyers.
The FTSEurofirst 300 index <> was up 1 percent, having
closed down in the previous session, part of an increasing yo-yo
effect on financial markets in general.
"I suspect we could see some more back-and-forth trading
today and then finish the week with another buying surge," said
Tom Hougaard, chief market strategist at City Index.
Earlier, Japan's Nikkei average fell 0.8 percent <> or
102.05 points at 12,604.58. The broader TOPIX index <> shed
0.9 percent to 1,226.44.
Analysts took some comfort, however, that losses had not
been greater.
"We are not seeing panic selling like before," said Hiroaki
Osakabe, fund manager at Chibagin Asset Management.
DOLLAR RECOVERS
The dollar edged up against the euro but was still heading
for the worst quarterly performance since late 2004.
The euro <EUR=> was down 0.7 percent on the day at $1.5734,
nearly two cents below last week's record highs above $1.59, but
still up 7.8 percent this quarter
"There was quite a strong rally in euro/dollar yesterday and
it seems that the market got caught a bit short dollars, so now
there is a slight recovery, and there is some extra funding
demand for dollars into quarter end," said Geoffrey Yu, currency
strategist at UBS in Zurich.
The dollar was also up a quarter percent against a basket of
six major currencies <.DXY>, but still down 6.5 percent for the
quarter.
Euro zone government bonds sold off slightly. The two-year
Schatz yield was up 2 basis points at 3.447 percent <EU2YT=RR>
while the 10-year Bund yield was at 3.905 percent <EU10YT=RR>,
barely changed.
(Editing by Stephen Nisbet)
