Stocks pull back from 6-week highs; euro slips

SYDNEY - Oil and higher-yielding currencies pulled back from multi-week highs on Tuesday and Asian stocks drifted lower as investors paused in their recent chase for riskier assets.

Investors appeared to be searching for reasons to stump up more money as a buoyant mood the previous day wore off, and some traders said this was an opportunity to take profits.

The subdued tone looked set to carry over into Europe.

Financial spreadbetters expected Britain's FTSE 100 to open 2-4 points lower, Germany's DAX to open unchanged to down 7 points and France's CAC-40 to open up 1 point to down 5 points.

U.S. stock futures eased 0.2 percent following a lackluster session on Wall Street overnight.

Yet, some analysts said the market's sudden moodiness was likely to be temporary. If anything, they said surveys show investors are keen to hold less cash, indicating that appetite for riskier assets is strengthening.

"Throughout the recent market turbulence, investors have been nervous, yet there has been no sign of a dash for the safety of cash," Barclays said in a note. It said it expects riskier assets to rise, albeit at a slow and choppy pace.

Tuesday marks the one-year anniversary of the S&P 500's .SPX 13-year closing low.

Bank of America-Merrill Lynch, noting that the index has rallied almost 70 percent since those lows, argued that history shows stock prices continue to climb in the second year after a bear market.

"Only once was 'year two' a year of negative return," it said, referring to the early 1930s bear market. It said the average gain in the first year of recovery is 46 percent, followed by 9 percent in the second year.

The MSCI index of Asian shares outside Japan .MIAPJ0000PUS was little changed, after having hit its highest level in over six weeks on Monday, lifted by encouraging U.S. economic data last week.

In Tokyo, the Nikkei stock average .N225 ended down 0.2 percent, having also hit six-week highs the previous day.

Commodity markets were also subdued. Oil prices fell 0.6 percent, off Monday's eight-week highs, as investors awaited industry data expected to show another rise in U.S. crude inventories.

To be sure, price performances this year show less risky trades as clear winners, even as a global recovery appears to slowly gather steam.

The yen and gold, traditional safe-haven plays, are up 3.1 percent, and 2.5 percent respectively.

Corporate and government bonds, especially those in emerging markets, have chalked up decent returns too. The benchmark JP Morgan Emerging Markets Bond Index Plus .JPMEMBIPLUS has gained nearly 3 percent so far this year, while the HSBC Asia dollar bond index is up more than 2 percent.

In contrast, the MSCI index of Asian shares outside Japan is down 0.7 percent since January. Likewise, the Australian dollar, an investor favorite among riskier, higher-yielding currencies is up just 1.3 percent.

The pull-back on Tuesday benefitted the U.S. dollar and yen, which are favored as "safer" investments in the currency market.

The U.S. dollar index .DXY edged up to 80.538, with resistance lurking around its February high of 81.34. The yen was firm against the U.S. dollar at 89.94.

The euro, still plagued by concerns about Greece's fiscal crisis, drifted lower to $1.3606.

Greek Prime Minister George Papandreou tried again on Monday to contain the crisis and shore up support for Greece.

He urged the Group of 20 nations to go after market speculators, who he blamed for raising Greece's borrowing costs by betting the country may default on its debts.

Sterling also faltered on weak economic data and after Moody's said Britain faces a dilemma over its support for the banking sector.

Currencies

Yen Gains on Speculation Japan's Exporters Repatriating Funds; Pound Drops The yen rose against the euro, snapping a two-day drop, on speculation Japanese companies are bringing home overseas earnings before the nation's fiscal year ends this month.

Yuan Faces Pressure for Appreciation on China's Interest-Rate Gap, Yi Says The yuan is facing increased pressure to appreciate as a widening interest-rate differential spurs inflows of funds through "underground money shops," China's top currency regulator said.

Pound's Slide to Help U.K. Outpace Euro Economies, Goldman's Nielsen Says The pound's drop last week to a 10- month low may help the U.K. economy grow faster than the region sharing the euro, which is hobbled by budget deficits and aging populations, according to Goldman Sachs Group Inc.

Dollar May Reach 8-Week High Versus Yen, Forecast Says: Technical Analysis The dollar may rise to an eight-week high of 92.30 yen after at least two gauges of daily momentum became positive, Forecast Pte said, citing trading patterns.

Employers See Little Change in U.S. Second-Quarter Payrolls, Survey Shows The number of U.S. employers planning to keep staffing levels unchanged held at a record high for a second consecutive quarter, signaling sustained job creation will take time as the economy recovers, a private survey showed.

Colombia, Mexico, Argentina: Latin America Local Bond and Currency Preview The following events and economic reports may influence trading in Latin American local bonds and currencies today. Bond yields and exchange rates are from the previous day's session.

Obama Has Little to Offer in Talks With Papandreou on Greece's Debt Crisis Greece's debt crisis may lead to slower U.S. growth, a rising dollar and turmoil in credit markets that may make it more difficult for cash-strapped states such as California to borrow.

General Growth Backers Add $3.9 Billion to Boost Brookfield's Revival Plan General Growth Properties Inc. said its biggest debt and equity holders offered to jointly invest $3.93 billion in the company, bolstering a plan with Brookfield Asset Management Inc. to bring the mall owner out of bankruptcy.

Papandreou to Ask Obama to Help EU Crackdown on `Unprincipled Speculators' Greek Prime Minister George Papandreou will press U.S. President Barack Obama to help Europe combat "unprincipled speculators," who he said have roiled financial markets and threaten a new global financial crisis.

RBS Has Biggest Pension Deficit of Financial Firms, Hymans Robertson Says Royal Bank of Scotland Group Plc, subject of the world's biggest bank bailout, has the largest pension deficit relative to its market value out of U.K. finance firms in the FTSE 350 index, according to a report.

Barker Sees 'Grounds for Optimism' on Britain's Recovery as Risks Diminish Bank of England policy maker Kate Barker said she is optimistic that the U.K. economy is recovering and that it faces fewer threats than before.

U.K. Treasury Minister Myners Says Banks Haven't Learned Lesson From Crash U.K. Treasury Minister Paul Myners said banks haven't learned their lessons from the credit crunch, arguing market discipline must go hand-in-hand with government action to restore public faith in financial institutions.