Worries that crude oil prices would resume their upward march kept European stocks flat on Tuesday, while the dollar and bond yields were steady ahead of key data on inflation in the United States. U.S. oil prices were about $1 per barrel below the 21-year high of $46.91 a barrel struck on Monday as jitters about supply disruptions from Venezuela eased after President Hugo Chavez won a referendum on his rule. But traders said an expected dip in U.S. crude oil stocks, further disruption to Iraq's oil flow and Russian firm YUKOS' financial crisis could cut into world oil supplies and see prices test new highs. U.S. oil prices were down 33 cents at $45.72 a barrel and London Brent had shed 40 cents to $42.29 a barrel. "U.S. oil prices have already gone above $45 as we had predicted. Anything above that level is overbought and we could see a correction," said Tetsu Emori, chief commodities strategist at Mitsui Bussan Futures in Tokyo. "But prices could still hit $50 if there are sudden ... attacks on oil infrastructure in the Middle East," he said, adding oil producers did not have spare capacity to deal with such shocks as demand remains strong, especially from China. Markets are waiting for U.S. consumer prices data due later on Tuesday to assess how quickly oil prices are feeding through. Concern that crude prices may damage global economic and earnings growth has hit stock market sentiment in recent months.
STOCKS, DOLLAR, BONDS
On Wall Street, the Dow Jones industrial average <.DJI> jumped 1.3 percent to close at 9,954.5 points on Monday as lower oil prices eased fears of a squeeze on corporate profits. In Tokyo, the Nikkei average <.N225> snapped a three-day losing streak to end up nearly 0.4 percent at 10,725.97 points, but analysts said investors were not convinced that oil prices had peaked. European stocks shrugged off a survey from Germany's ZEW research institute showing investor confidence in the euro zone's largest economy falling faster than economists had been expecting to a 13-month low in August. The FTSE Eurotop 300 index <.FTEU3> of pan-European blue chips was little changed at 950.3 points, while the narrower DJ Euro Stoxx 50 index <.STOXX50E> was up 0.2 percent at 2609.6. The dollar, waiting for direction from economic data, was stalled near this week's four-week low against the euro seen after Friday's record U.S. trade deficit data reminded investors of the economy's structural problems. The dollar was little changed against the euro and yen at around $1.2352 and 110.4 respectively. Euro zone government bond markets paid scant regard to the ZEW survey and were focussed on U.S. inflation data. The benchmark 10-year Bund yield was down 0.5 basis points at around 4.085 percent and the interest rate-sensitive two-year Schatz yield was little changed at around 2.461 percent.///