Central Bank Uncertainty Weighs On Shares; Oil Falls

Stock markets around the world edged lower on Tuesday as uncertainty over the European Central Bank's next policy move gave investors caution with many indexes near multi-year or all-time highs.

Central Bank Uncertainty Weighs On Shares; Oil Falls

* European, U.S. shares fall from highs on policy uncertainty

* Oil dips on Libya output woes, Brent near four-month low

* Gold slips, on track for seventh straight day of losses

Stock markets around the world edged lower on Tuesday as uncertainty over the European Central Bank's next policy move gave investors caution with many indexes near multi-year or all-time highs.

The European Commission issued economic forecasts suggesting the euro zone economy would expand more slowly next year than previously expected, an estimate that opened the door to a possible rate cut by the European Central Bank on Thursday. In addition, a sharp drop in euro zone inflation has also suggested more action could be taken by the central bank.

While a cut would likely be viewed positively by markets, the need for one underlines how the economy continues to struggle to gain momentum. European shares fell 0.2 percent, pulling back from five-year highs.

Central bank policy is also in focus in the United States, with mixed economic data casting doubt on when the Federal Reserve might start to slow its massive stimulus, which has taken both the Dow and S&P 500 to record levels this year.

"Investors are definitely confused about what central banks are going to do. When the Fed surprised everyone by not tapering recently, that really freaked people out," said Matt King, chief investment officer at Bell Investment Advisors in Oakland, California.

"Europe has a little more ammo left to confront its problems, and there's a decent chance the ECB will use some since there is still troublingly slow growth and high unemployment there."

The Institute for Supply Management's October read on the U.S. services sector came in at 55.4, above expectations.

The Dow Jones industrial average was up 0.23 point, or 0.00 percent, at 15,639.35. The Standard & Poor's 500 Index was down 1.73 points, or 0.10 percent, at 1,766.20. The Nasdaq Composite Index was up 4.61 points, or 0.12 percent, at 3,941.20.

The benchmark 10-year U.S. Treasury note was down 13/32, the yield at 2.6476 percent.

The prospect of both the euro zone and U.S. central banks supporting the global economy helped boost MSCI's world equity index 16 percent this year, though it fell 0.3 percent on Tuesday.

The euro traded just under $1.35 for most of the morning, holding near a seven-week trough of $1.3442 set on Monday. The U.S. dollar index, which measures the greenback against a basket of currencies, rose 0.2 percent, above a recent nine-month low.

However, against the Japanese currency, the dollar fell about 0.1 percent to 98.55 yen following a reaffirmation by Japan's central bank on Monday that it would do everything necessary to reflate its economy. [ID:nL3N0IQ2IQ}


Investors are awaiting Friday's U.S. October non-farm payrolls data to see if the unemployment rate eases from the current 7.2 percent. Economists in a Reuters survey expect the rate to have edged up. The Fed has promised to hold interest rates ultra-low at least until unemployment drops to 6.5 percent, provided inflation remains mild.

Before that, third-quarter U.S. gross domestic product data on Thursday will help show how strong the momentum in the economy was before last month's partial government shutdown.

Only China now looks likely to buck the trend for more monetary policy support. Premier Li Keqiang said in a speech published in full late on Monday that adding extra stimulus would be more difficult since printing new money would cause inflation.

Asian shares struggled as a result, slipping 0.2 percent, though Japan's Nikkei stock average bounced off its lows and managed a 0.2 percent gain.

Australian shares also bucked the downtrend, rising 0.8 percent after the Reserve Bank of Australia kept its cash rate steady at a record low 2.5 percent, as was widely expected.

In commodity markets, gold slipped 0.4 percent in its seventh straight day of slight losses, while copper rose 0.2 percent.

Brent crude dipped 0.8 percent at $105.45 per barrel, near a four-month low on worries over a prolonged period of reduced exports from Libya. U.S. crude futures lost 1.3 percent to $93.32 per barrel.

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