UK-MARKETS-GLOBAL:Asian shares rise on bets Fed may stay cautious
A pedestrian is reflected in an electronic board showing the graph of the recent fluctuations of Japan’s Nikkei average outside a brokerage in Tokyo March 13, 2015. REUTERS/Yuya Shino

By Ryan Vlastelica

NEW YORK (Reuters) – Stocks mostly fell on Tuesday as the Federal Reserve opened a two-day policy meeting, which is being closely watched for signs of when the U.S. central bank will raise interest rates.

Trading was volatile in other asset classes. Crude oil prices edged lower and remained on track for their eighth decline in the past nine sessions, but were well off lows of the day. The U.S. dollar index turned flat, rebounding off earlier weakness.

The euro , which recently hit a 12-year low, rose against the dollar for a second straight session, though it was off its session peak.

European equity markets retreated from gains built on the euro’s decline, which cheapens the price of exports from the euro zone. London’s market <.ftse> was an exception, and Asian markets ended higher.

U.S. crude oil hit a six-year low of $ 42.63 a barrel before paring losses to trade down 0.2 percent, at $ 43.79. The recent weakness has come on oversupply and the possibility that a nuclear agreement with Iran could add to the glut.

Brent crude fell 1.3 percent to $ 53.22 per barrel.

Investors were awaiting the release of the Fed’s policy statement on Wednesday afternoon. Many analysts expect the Fed to remove the word “patient” from its statement to describe its approach to raising rates later in the year. Doing so would put the Fed a step closer to its first rate hike since 2006.

Economists polled by Reuters are almost evenly split on whether a rate increase will come in June or later in the year. Recent U.S. data, including Tuesday’s on February housing starts, has fuelled talk that the Fed will remain on hold as long as possible.

“A lot of today’s decline is speculation on how the Fed will respond, along with the sense that (U.S.) growth is weak,” said Bruce McCain, chief investment strategist at Key Private Bank in Cleveland.

The Dow Jones industrial average <.dji> fell 137.69 points, or 0.77 percent, to 17,839.73, the S&P 500 <.spx> lost 9.54 points, or 0.46 percent, to 2,071.65, and the Nasdaq Composite <.ixic> dropped 4.05 points, or 0.08 percent, to 4,925.46.

The MSCI International ACWI price index <.miwd00000pus> slipped 0.2 percent while European shares <.fteu3> ended 0.7 percent lower, a day after hitting a 7-1/2-year high.

The benchmark 10-year U.S. Treasury note rose 11/32 in price, pushing the yield down to 2.0594 percent.

The euro rose 0.2 percent to $ 1.0592, having earlier risen as much as 0.8 percent. Earlier this week, the euro dropped to a 12-year low of $ 1.0457 .

The U.S. dollar index, which measures the greenback against a basket of major currencies, was flat at 99.612. On Monday, the index posted its biggest drop in more than a month.

Gold prices fell 0.4 percent while silver was down 0.4 percent. Copper lost 1 percent in its second straight daily decline.

(Editing by Dan Grebler and Leslie Adler)

Reuters

Premarket: Weak euro powers European stocks to new highs

The euro struck a fresh 12-year low on Monday and euro zone stocks reached new peaks on bets that the currency’s relentless fall will boost corporate earning prospects just as the rising dollar hits those of U.S. firms.

German stocks powered above 12,000 points for the first time, while the main pan-euro zone benchmark indices hit new seven-year highs.

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The euro rebounded as European trading got under way, however, while U.S. oil prices recovered after slipping to a fresh six-year low, although they were still down on the day.

This week’s focal point for global financial markets is the U.S. Federal Reserve’s policy decision on Wednesday, with the euro/dollar exchange rate likely to remain the dominant driver for major equity, currency and bond markets until then.

“With dollar momentum this strong and investors unlikely to ride any euro rally ahead of the (Fed) meeting, risks for the euro are still to the downside for the next couple of days and any bounces are likely to be limited,” Unicredit FX analysts said on Monday.

In early European trading the euro was up 1/3 of a per cent against the dollar at $ 1.0530, having slid to $ 1.0457 early in the Asian session, its lowest since January 2003.

The euro has lost roughly a quarter of its value versus the dollar since mid-2014 and suffered its biggest weekly fall since September 2011 last week, shedding 3.2 per cent as the European Central Bank launched its trillion euro money-printing scheme.

Goldman Sachs now sees the euro at $ 0.80 by the end of 2017.

European stocks took heart. Germany’s DAX was up 0.85 per cent at 12,001 points, France’s CAC 40 half a per cent higher at 5,039 points, and Britain’s FTSE 100 index up 0.25 per cent at 6,758 points.

The FTSEurofirst 300 index of top European shares rose 0.3 per cent to 1,584 points and the euro zone top 50 stocks index was up 0.5 per cent at a seven-year high of 3,673 points.

MSCI’s broadest index of Asia-Pacific shares outside Japan closed a few ticks higher, while Chinese shares outperformed to hit five-year-highs.

The CSI300 index and the Shanghai Composite Index both rose more than 2 per cent after Premier Li Keqiang said Beijing had scope to adjust policies to help boost the world’s second largest economy.

Japan’s Nikkei hit a 15-year high of 19,349 points Recent weak U.S. inflation and retail sales data have not derailed expectations that the Fed will tighten monetary policy, and the prospects that higher rates and a stronger dollar will hit U.S. corporate profits have dragged on shares.

Wall Street futures were seen opening 0.2 per cent higher on Monday, lagging Europe’s main bourses.

Many observers expect the Fed to remove its pledge to remain “patient” on delivering its first interest rate hike since 2006, with economists polled by Reuters almost evenly split on whether a first hike will come in June or later in the year.

German 10-year Bund yields inched up 1 basis point to 0.265 per cent, having hit a record-low 0.188 per cent last week. Longer-dated German yields fell, however, and benchmark Spanish, Italian and Portuguese yields were also headed back towards their recent record lows.

The ECB is expected to buy more sovereign bonds as part of its stimulus program this week, limiting any upward pressure on bond yields.

“The current dynamic is incredible, logical and extendable … until something changes, but there is little sign of that right now,” Citi rates strategist Mark Schofield said.

Oil prices continued to tumble, with U.S. crude dropping more than 2 per cent at one point to a six-year low on fears of oversupply. The International Energy Agency said on Friday that a global glut of oil is growing and U.S. production shows no sign of slowing.

U.S. crude was last down about 0.8 per cent at $ 44.48 a barrel, while Brent was 0.6 per cent lower at $ 54.32.

After snapping its longest daily losing streak since 1973 on Friday with a first rise in 10 sessions, gold consolidated its gains. Bullion was flat on the day at $ 1,158 an ounce.

Weak euro powers European stocks to new highs

By Jamie McGeever

LONDON (Reuters) – The euro struck a fresh 12-year low on Monday and euro zone stocks reached new peaks on bets that the currency’s relentless fall will boost corporate earning prospects just as the rising dollar hits those of U.S. firms.

German stocks powered above 12,000 points for the first time, while the main pan-euro zone benchmark indices hit new seven-year highs.

The euro rebounded as European trading got underway, however, while U.S. oil prices recovered after slipping to a fresh six-year low, although they were still down on the day.

This week’s focal point for global financial markets is the U.S. Federal Reserve’s policy decision on Wednesday, with the euro/dollar exchange rate likely to remain the dominant driver for major equity, currency and bond markets until then.

“With dollar momentum this strong and investors unlikely to ride any euro rally ahead of the (Fed) meeting, risks for the euro are still to the downside for the next couple of days and any bounces are likely to be limited,” Unicredit FX analysts said on Monday.

In early European trading the euro was up 1/3 of a percent against the dollar at $ 1.0530 (EUR=), having slid to $ 1.0457 early in the Asian session, its lowest since January 2003.

The euro has lost roughly a quarter of its value versus the dollar since mid-2014 and suffered its biggest weekly fall since September 2011 last week, shedding 3.2 percent as the European Central Bank launched its trillion euro money-printing scheme.

Goldman Sachs now sees the euro at $ 0.80 by the end of 2017.

European stocks took heart. Germany’s DAX (.GDAXI) was up 0.85 percent at 12,001 points, France’s CAC 40 (.FCHI) half a percent higher at 5,039 points, and Britain’s FTSE 100 index up 0.25 percent at 6,758 points (.FTSE).

The FTSEurofirst 300 (.FTEU3) index of top European shares rose 0.3 percent to 1,584 points and the euro zone top 50 stocks index was up 0.5 percent at a seven-year high of 3,673 points.

ECB IN AGAIN?

MSCI’s broadest index of Asia-Pacific shares outside Japan closed a few ticks higher, while Chinese shares outperformed to hit five-year-highs.

The CSI300 index and the Shanghai Composite Index (.SSEC) both rose more than 2 percent after Premier Li Keqiang said Beijing had scope to adjust policies to help boost the world’s second largest economy.

Japan’s Nikkei hit a 15-year high of 19,349 points (.N225)

Recent weak U.S. inflation and retail sales data have not derailed expectations that the Fed will tighten monetary policy, and the prospects that higher rates and a stronger dollar will hit U.S. corporate profits have dragged on shares.

Wall Street futures were seen opening 0.2 percent higher (ESc1) on Monday, lagging Europe’s main bourses.

Many observers expect the Fed to remove its pledge to remain “patient” on delivering its first interest rate hike since 2006, with economists polled by Reuters almost evenly split on whether a first hike will come in June or later in the year.

German 10-year Bund yields inched up 1 basis point to 0.265 percent, having hit a record-low 0.188 percent last week. Longer-dated German yields fell, however, and benchmark Spanish, Italian and Portuguese yields were also headed back towards their recent record lows.

The ECB is expected to buy more sovereign bonds as part of its stimulus program this week, limiting any upward pressure on bond yields.

“The current dynamic is incredible, logical and extendable … until something changes, but there is little sign of that right now,” Citi rates strategist Mark Schofield said.

Oil prices continued to tumble, with U.S. crude dropping more than 2 percent at one point to a six-year low on fears of oversupply. The International Energy Agency said on Friday that a global glut of oil is growing and U.S. production shows no sign of slowing.

U.S. crude (CLc1) was last down about 0.8 percent at $ 44.48 a barrel, while Brent (LCOc1) was 0.6 percent lower at $ 54.32.

After snapping its longest daily losing streak since 1973 on Friday with a first rise in 10 sessions, gold consolidated its gains. Bullion was flat on the day at $ 1,158 an ounce (XAU=).

(Additional reporting by Lisa Twaronite in Tokyo; Editing by Catherine Evans; To read Reuters Global Investing Blog click on http://blogs.reuters.com/globalinvesting; for the MacroScope Blog click on http://blogs.reuters.com/macroscope; for Hedge Fund Blog Hub click on http://blogs.reuters.com/hedgehub)

Carmakers to gain most from weak euro

On Wednesday, Moody’s said it had lowered its forecast for the euro-dollar exchange rate to 1.10 through 2015 and 1.13 in 2016, adding that it did not expect any major recovery in the single currency before 2017.

“In general, a weaker euro boosts the price competitiveness of euro area exports, which account for about 25 percent of Europe’s gross domestic product,” the ratings agency said in a research note.

“However, a lower euro exchange rate will raise import prices and increase the cost of inputs that are denominated in currencies other than the euro.”

Moody’s said the low euro would prove “mildly negative” for non-food retailers, while airlines would suffer the most.

“While demand for flights to Europe might increase, driven by the rising popularity of euro area destinations, most of this rising demand will be captured by non-European airlines,” it said.

“In addition, flying from Europe to other continents will become less attractive. Furthermore, the positive effect of falling oil prices will be partially offset by the weakening euro, as global oil prices are quoted in U.S. dollars making fuel purchases more expensive for European airlines.”

In a February research note, Goldman Sachs Asset Management said the weak euro could boost revenues for many of the region’s companies.

“With 54 percent of aggregate corporate revenues being generated outside of Europe, we look for a weakening euro to benefit the competitiveness and profitability of many European companies through a more competitive export business and higher profits when converting overseas profits back into the local euro currency,” the bank said.

Euro bounces back, global stocks up after Greek vote

By Caroline Valetkevitch

NEW YORK (Reuters) – The euro rebounded from two days of sharp losses on Monday even after an anti-bailout party was victorious in Greek elections, while global stock indexes edged up on confidence in the European Central Bank’s new money-printing program.

The electoral results spurred concern over new instability in the euro zone, although the possibility of Greece leaving the bloc was considered remote.

Stocks continued their ECB-driven rally, and energy company share gains helped U.S. stocks to end higher.

The ECB announced a massive bond-buying plan last Thursday meant to buoy the flagging euro zone economy, where inflation has turned negative.

“There was a lot of trepidation in the market going into the Greek election … but by this morning the Syriza win was priced into the market already,” said Robert Francello, head of equity trading for Apex Capital in San Francisco.

MSCI’s global share index <.MIWD00000PUS> rose 0.2 percent, while an index of European shares <.FTEU3> ended up 0.6 percent.

On Wall Street, the Dow Jones industrial average <.DJI> rose 6.1 points, or 0.03 percent, to 17,678.7, the S&P 500 <.SPX> gained 5.27 points, or 0.26 percent, to 2,057.09 and the Nasdaq Composite <.IXIC> added 13.88 points, or 0.29 percent, to 4,771.76.

A blizzard bearing down on New York emptied Wall Street offices on Monday. But stock exchanges, including the New York Stock Exchange, were expected to be open for normal operating hours on Tuesday.

Energy stocks rose after Abdulla al-Badri, OPEC’s secretary-general, told Reuters on Monday that oil prices may have reached a floor and could move higher very soon. The S&P energy index <.SPNY> was up 1.4 percent.

Athens’ main index fell, however, and Greek bond yields rose. Ten-year yields rose to more than 9 percent, while the main stock index <.ATG> fell 3.2 percent.

Following the outcome of Sunday’s vote, the euro hit its lowest against the U.S. dollar since September 2003 at $ 1.1098 in Asian trading, according to the EBS trading platform .

In late New York trade, the euro was up 0.52 percent at $ 1.1262, just off its high for the day of $ 1.1295.

“Everything that was priced in for euro negative has happened,” said John Doyle, director of markets at Washington, D.C.-based Tempus Inc.

Syriza’s demands for a debt restructuring have raised the prospect of a stand-off between Athens and other European leaders that might lead to a “Grexit,” although financial markets were treating that as a marginal risk on Monday.

Syriza leader Alexis Tsipras promised Greeks on Sunday that the five years of austerity imposed under bailout programs worth 240 billion euros from the European Union and the International Monetary Fund were over. He later struck a deal with the right-wing, anti-bailout Independent Greeks party to form a government.

In the U.S. Treasuries market, debt prices slipped ahead of $ 90 billion of fixed-rate supply and a Federal Reserve meeting later this week. Yields on benchmark 10-year notes held steady near 1.82 percent, around their closing level on Friday.

Oil prices closed lower after an up-and-down session. Brent fell 1.3 percent to $ 48.16. U.S. crude lost almost 1 percent, settling at $ 45.15, the lowest settlement price for the existing front-month contract.

(Additional reporting by Daniel Bases and Lucas Iberico Lozada in New York; Marius Zaharia, Atul Prakash, Blaise Robinson and Patrick Graham in London; Editing by Catherine Evans, Ruth Pitchford, Dan Grebler and Andre Grenon)

Why New Zealand can handle Europe, oil troubles

New Zealand’s exports may face headwinds from the decline in oil price and strengthening of its currency against the euro, but the country’s prime minister told CNBC that the “Kiwi economy” is set to carry on booming.

The New Zealand dollar has appreciated just over 8 percent against the euro since in the last three months as expectations have risen that the European Central Bank (ECB) will announce a full-blown quantitative easing program when it meets this Thursday.

The kiwi dollar, as it is known, strengthened further to a record high against the euro on Friday after the Swiss National Bank made a surprise policy move to abandon its minimum exchange rate against the euro.

New Zealand Prime Minister John Key told CNBC that a stronger currency would not hinder the economy, one that is currently outperforming many developed nations.

“Obviously it’s had an impact as it’s pushed up the kiwi-euro rate and that makes it a little bit more difficult for our exporters but overall our economy is still very strong. We think we’ll grow 3.25 percent every year for the next three years, so about ten percent over the next three years so we’re still confident we can get there, even with a higher exchange rate.”

In December, Statistics New Zealand said the economy was growing faster than expected and had accelerated in the third quarter. Gross domestic product increased 1 percent in the third quarter from the previous quarter, according to the statistics body.

Key said that the New Zealand economy was being helped by economic activity in the U.S. and he brushed aside concerns over a slowdown in growth in Asia. Europe was another matter, however.

“The U.S. is much stronger than people think now, we see a lot of activity out of the U.S. both in terms of tourists coming and the buying activity. Asia is still quite strident and there is some concern that China is going to fall over but I don’t think that’s going to happen. It’s still Europe that’s got to deal with its fundamental issues.”

New Zealand’s third-quarter growth was driven by its primary industries, including the dairy industry and oil and gas exploration and extraction, which grew by 5.8 percent.

After dairy, meat and wood, oil is the fourth-largest export for New Zealand and, as such, the steep decline in global oil prices – down some 60 percent since June 2014 – could hit the country’s economy.

Indeed, exploration companies like New Zealand Oil and Gas, TEG Oil and Key Petroleum are all looking to defer projects in the region. Similarly, milk prices in New Zealand are also under pressure and prices forecasts have been revised lower for 2015 .

Key remained confident, however, that New Zealand could withstand the decline in commodity prices. “The fall in dairy prices is significant in New Zealand terms because it’s our largest export but we’ve had very strong commodity prices elsewhere, meat prices are strong and forestry prices are strong and we’re still pretty confident that dairy prices will recover.”

Key didn’t think that the oil prices would recover dramatically but the price decline could boost consumer sentiment.

“I don’t think oil prices will recover dramatically but the interesting thing about it is looking at the stimulatory effect of that drop in oil prices and so the impact on consumers is actually quite positive, it’s a tax cut or wage increase.”

– By CNBC’s Holly Ellyatt, follow her on Twitter @HollyEllyatt. Follow us on Twitter: @CNBCWorld

Czech central bank toughs out falling crown

Photo: Mat?j SkalickýPhoto: Mat?j Skalický How low can it go? That appears to be the most pertinent question at the moment regarding the value of the Czech crown against both the euro and dollar. The Czech currency slipped even further Monday, at one stage in the day trading at 28.5 crowns to the euro before recovering some ground to around 28.35 crowns. It hit a six year low against the euro and against the dollar it slipped to 23.99, a level not seen for the past nine years.

According to The Wall Street Journal, the Czech crown is the world’s worst performing currency against the dollar since the start of 2015 with a fall of 5.4 percent.

The crown’s drop has been sparked by a December annual inflation figure of just 0.1 percent, far adrift of the Czech National Bank target of 2.0 percent. That news was exacerbated Monday by poor retail sales figures for November. The bank does not expect the target inflation rate to be hit now until the start of 2016. And the prospect of a return of deflation, partly fuelled by falling oil prices, has stoked fears that the central bank could lower its target crown-euro exchange rate from the current 27 crowns to perhaps even 29 crowns.

The bank so far says that no such step is planned. The bank’s head of statistics and currency, Tomáš Holub, told Czech Television on Sunday that some positive effects could stem from increased domestic demand caused by low oil prices. In addition, there are no clear signs that deflation is menacing the Czech economy, he added.

The bank has taken no action so far to stem the crown’s fall. With benchmark interest rates at an almost insignificant 0.05 percent there is plenty of room to raise them but that would hurt still fragile growth. The bank could buy crowns against euros and dollars, but it probably reckons that course would look like desperation and might have a limited effect given the current sentiment against the crown.

Some analysts say the crown could easily ease to 29 or even 30 crowns against the euro. And most caution that there are probably more downsides from such a development than upsides caused by cheaper exports.

For one thing, a lower crown against the dollar will make oil and other imports more expensive. Czech exporters, some say, have already wrung maximum benefits from the lower crown over the past six months and are operating at near capacity. In that case, an even lower crown will not produce spark more exports and growth but could make some foreign components more costly and also delay investments in imported machine tools and other equipment needed for increased production.

The arguments will no doubt continue with the crown remaining weak and under pressure Tuesday and with all eyes turning to the forthcoming meetings of the central bank board.

Euro-Area Prices Drop More Than Forecast, Highlighting Growing Risk of Deflation

The inflation rate in the euro area fell below zero for the first time in more than five years, bolstering the case for more European Central Bank stimulus.

Prices dropped 0.2 percent in December, the European Union’s statistics office in Luxembourg said today. That’s the lowest rate since September 2009. Economists in a Bloomberg survey predicted a decline of 0.1 percent. Unemployment held at 11.5 percent in November, Eurostat said in a separate report.

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ECB officials are working on a plan to buy government bonds as they strive to prevent a deflationary spiral of falling prices and households postponing spending, a risk President Mario Draghi has said can’t be “entirely excluded.” They may use a gathering today to weigh options for a quantitative-easing program that may be announced at their Jan. 22 policy meeting.

“According to the ECB’s own logic, with sub-zero inflation, no sign of a material pickup on the horizon, and inflation expectations de-anchoring, there is a compelling case for further monetary easing,” said Teunis Brosens, an economist at ING Groep NV in Amsterdam. “The question no longer seems ‘if’ the ECB is going to announce QE, but ‘how’ it will be tailored.”

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Joblessness in Italy rose to a record 13.4 percent in November, separate data showed. German unemployment, calculated under a national measure, fell to 6.5 percent in December, the lowest in more than two decades.

Oil-Price Drop

The euro was little changed after the release and traded at $ 1.1863 at 11:23 a.m. in Frankfurt, down 0.2 percent today. The Stoxx Europe 600 Index was up 0.7 percent.

More from Bloomberg.com: Oil Extends Drop Below $ 48; U.S. Stockpiles Seen Rising

A sluggish economy and slumping oil prices are damping inflation across the euro region. Consumer prices are falling on an annual basis in Spain and Greece (GKCPIUHY), while data yesterday showed inflation in Germany at 0.1 percent, its weakest since 2009.

Crude oil prices have fallen about 50 percent in the past year amid a supply glut. Core euro-zone inflation, which strips out volatile items such as energy, food, tobacco and alcohol, increased to 0.8 percent year-on-year in December.

ECB officials have taken different approaches in analyzing the impact of plunging oil prices on the economy. While Draghi has warned of a dis-anchoring of inflation expectations and signaled support for QE, Bundesbank President Jens Weidmann favors not acting at this time, arguing that the drop could be a “mini-stimulus package.”

QE Proposals

ECB Chief Economist Peter Praet told Germany’s Boersen-Zeitung last month that in an environment in which inflation expectations are “extremely fragile,” officials cannot “simply look through” the slide in energy costs. Praet makes a recommendation at the start of each monetary-policy meeting.

Central bank staff have worked on QE proposals in the past two months, and Dutch newspaper Het Financieele Dagblad reported yesterday that governors may be offered three different options to choose from at their Jan. 22 meeting.

Since June, the ECB has cut interest rates twice, offered cheap long-term loans to banks to jumpstart lending and started a purchase program for asset-backed securities — a decision Weidmann and German Executive Board member Sabine Lautenschlaeger opposed.

“If you look at past experience we’ve taken major monetary-policy decisions in a situation where there was no unanimity,” Draghi said after the ECB’s Dec. 4 meeting. “So this is what we have to keep in mind.”

To contact the reporter on this story: Stefan Riecher in Frankfurt at [email protected]

To contact the editors responsible for this story: Fergal O’Brien at [email protected] Jana Randow, Paul Gordon

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Euro hits nine-year low versus US dollar on manufacturing, oil-price slump

The euro hit a nearly nine-year low versus the dollar on Monday as investors bet on quantitative easing by the European Central Bank while soft manufacturing surveys pushed down shares and sent oil prices to 5 1/2-year lows.

European shares are expected to dip, with Britain’s FTSE seen falling by up to 0.4 percent. Germany’s DAX andFrance’s CAC are both seen falling as much as 0.2 percent.

The euro fell to as low as $ 1.18605, its weakest level since March 2006, having fallen below an important support at $ 1.20. The common currency last traded at $ 1.1926, down 0.6 percent from late U.S. trade on Friday.

In an interview with German financial daily Handelsblatt published on Friday, ECB President Mario Draghi said the risk of the central bank not fulfilling its mandate of preserving price stability was higher now than half a year ago.

“The market took his comments to mean that he is ready to adopt quantitative easing,” said Shin Kadota, chief forex strategist at Barclays in Tokyo.

Economists forecast that Wednesday’s euro zone inflation data will show that in December prices fell 0.1 percent, the first decline since 2009.

That should fan expectations the ECB could ease its policy as soon as Jan. 22, when it holds its first policy meeting this year.

Also underscoring the pressure on central banks to implement more stimulus, business surveys last week showed factories struggled to maintain growth across Europe and Asia.

Even in the United States, which is seen as one bright spot in the global economy, the pace of manufacturing growth slowed more than expected in December.

That sapped investor appetite for stocks, with Wall Street shares ending mostly flat on the first day of trade in 2015 on Friday, after stellar gains of 11.4 percent in the S&P500 index last year.

S&P futures dipped 0.1 percent in early Asian trade on Monday while MSCI’s broadest index of Asia-Pacificshares outside Japan dropped 0.6 percent.

Japan’s Nikkei fell 0.2 percent on the first trading day of the year.

Chinese shares, however, maintained their bullish tone since last year on hopes of more stimulus, as property shares jumped on local media reports saying mortgage restrictions had been loosened.

The CSI300 index, hitting a five-year high, added more than 3 percent on the first trading day of 2015. It rallied 52 percent last year.

Oil prices, whose decline of more than 50 percent from peaks in June last year rattled many energy producers, hit a 5-1/2-year low as global growth concerns fanned fears of a supply glut.

Brent crude futures dropped as low as $ 55.36 a barrel, also its lowest since May 2009, before edging back to $ 55.42, still down a dollar.

“Oil demand is unlikely be robust this year when we look at the state of economies in China, Japan and Europe,” said Yusuke Seta, a commodity sales manager at Newedge Japan.

That did not help commodity currencies such as the Canadian dollar, which fell to C$ 1.1843 to the U.S. currency, its lowest level since mid-2009.

The Australian dollar likewise dropped to a 5-1/2-year low of $ 0.8036.

The U.S. dollar also surged against the Swiss franc and sterling, extending a recent bull run as markets wagered a relatively healthy U.S. economy will lead the Federal Reserve to raise rates in the middle of this year. 

GLOBAL MARKETS-Euro wobbles before Athens vote, Greek shares tumble

* Asian shares tick up after Fresh highs on Wall Street

* Euro wallows near 28-mth lows before Greek parliamentary vote

* Greek shares drop almost 8 percent

* AirAsia posts biggest drop in 3 yrs after aircraft goes missing

* Oil rebounds on renewed tensions in Libya

By Marc Jones

LONDON, Dec 29 (Reuters) – Europe’s financial markets returned from their Christmas break in a cautious mood on Monday, as Greece’s parliament prepared for a final round of presidential voting, which if unsuccessful, will fuel worries about its future in the euro.

A result is expected around 1100 GMT. Should Greek Prime Minister Antonis Samaras fail to get enough support for his nominee, Stavros Dimas, he will have to call snap elections for late January or early February, which polls suggest the anti-EU/IMF bailout Syriza party would win.

European shares reflected the uncertainty as stocks in Athens plunged almost 8 percent in early trading and the euro nudged back towards a more than two-year low against the dollar.

Syriza is set on writing off much of Greece’s debt and reversing years of austerity just as the economy returns to growth, a stance that could see Athens shut out of the markets.

“It really feels too close to call now,” said UniCredit interest rate strategist Luca Cazzulani.

“If they manage to elect a president, investors will start putting on risk over the coming days and we will start to talk about a different set of topics in the new year. If they fail, then uncertainty will be with us for some weeks at least.”

Away from Athens, trading was thin.

The rouble’s recent rebound ran out of steam , but Asian stocks had risen overnight following fresh gains for the record-high Wall Street last week.

MSCI’s broadest index of Asia-Pacific shares outside Japan climbed 1 percent with Australian shares and Hong Kong up 1.5 and 1.8 percent respectively.

Tokyo’s Nikkei bucked the trend and slid 1 percent as reports of a suspected Ebola case in Japan spooked a market still on track for about an 8 percent gain on the year.

In Malaysia, shares in AirAsia posted their biggest one-day drop in more than three years after one of its aircraft went missing on its way to Singapore from Indonesia.

BAILOUT BARTER

Greek government bonds lost ground ahead of parliament’s vote. Former European Commissioner Dimas, the candidate of the ruling coalition, needs 180 votes to become president having got just 168 in the last round.

The euro was last at $ 1.2183, not far from its lowest since August 2012, at $ 1.2165, which was hit the previous week.

The dollar stood firm at 120.200 yen, remaining in sight of a 7-1/2 year high of 121.86 hit earlier in the month, but lacking enough momentum to challenge that peak. This year, the greenback has risen roughly 15 percent against the yen.

On the 2015 outlook for risk assets, investors will be concerned about whether the robustness of the U.S. economy will be able to offset signs of slowdown in powerhouse China and the euro zone.

There is also uncertainty about the impact of the 45 percent drop in oil prices over the last six months on many of the larger producers that depend on the revenues.

After two days of falls, oil prices rose as escalating clashes in Libya stoked worries about supply.

A fire caused by fighting at a main export terminals has destroyed 800,000 barrels of crude – more than two days of Libya’s output – officials said, amid clashes between factions battling for control of the nation.

“Libya, and all the other problems, warrants some kind of risk premium,” said Jonathan Barratt, chief investment officer at Sydney’s Ayers Alliance.

(Additional reporting by John Geddie in London and Keith Wallis in Singapore; Editing by Dominic Evans)