LONDON, Jan 13 - A warning shot from the European Central Bank halted the dollar's decline at least temporarily on Tuesday while European stocks jumped on technology share gains. Recent cold weather in the United States helped to drive oil prices to post-Iraq war highs. Demand for European government bonds slipped, raising yields. Japanese shares fell from 11-week highs, partly on worries about the strong yen. Wall Street looked set to open flat, with investors waiting for bellwether stock earnings for direction. The tumbling dollar was held around one cent off record lows against the euro in reaction to Monday's comments by ECB President Jean-Claude Trichet that "brutal" exchange rates were unwelcome. "Trichet's comments yesterday were stronger than those he has made recently and the size of the euro's pullback reflects increasing concern ahead of the G7 meeting (in February)," said Mitul Kotecha, head of global foreign exchange research at Credit Agricole Indosuez in London.
Investors were also waiting to see what hints Federal Reserve Chairman Alan Greenspan would give about the U.S. economy and the outlook for interest rates at a Berlin event later in the day. The dollar has fallen sharply this year, adding to last year's falls and prompting concern that a strong euro and yen will hurt the fragile European and Japanese economic recovery. It was up slightly on the euro at $1.2755 and at 106.35 yen , down around a third of a percent. As well as the dollar, analysts have also expressed worries that rising oil prices could hurt global economic growth. There was no respite on Tuesday. Brent crude oil hit post-Iraq war highs, driven by concerns about tight U.S. fuel inventories after a cold snap and with OPEC showing no sign of increasing supplies. February Brent futures were trading 19 cents higher at $31.95 a barrel.
STOCKS, BONDS
European shares were sharply higher, cheered by technology stocks, while energy companies lent support on the oil price highs. The FTSE Eurotop 300 index <.FTEU3> of pan-European blue chips was up 0.95 percent. The narrower DJ Euro Stoxx 50 index <.STOXX50E> rose 1.32 percent. Sentiment was buoyed by Monday's surge in U.S. technology shares on talk that the world's second-largest maker of cellphones, Motorola and other companies had won business worth more than $2 billion in China. "Europe is piggybacking on the United States," said Akber Khan at Deutsche Bank European Equities. Earlier in Tokyo, the Nikkei average <.N225> retreated from an 11-week high as investors, wary of a strong yen and recent rapid gains in the market, took profits. The Nikkei closed at 10,849.68, down 1.05 percent or 115.37 points, its biggest one-day loss since December 17. Euro zone government bond yields crept higher on Tuesday, moving away from 3-1/2 month lows set a day ago as the euro held below recent record highs against the dollar. The benchmark 10-year Bund yield was up 2.1 basis points at 4.14 percent.//www.s.com