* Yen rebound weighs on dollar
* Earnings, banks drag European stocks lower
* Investor caution supports bonds
By Jamie McGeever
LONDON, May 11 (Reuters) - A promising start to the week by
stocks fizzled out on Wednesday after a series of disappointing
earnings reports. Profit-taking hit the dollar after it reached
a two-week high on Tuesday.
Germany's DAX .GDAXI snapped a four-day winning streak and
the broader FTSEuroFirst 300 index of leading European shares
.FTEU3 erased much of Tuesday's rise, which was the biggest in
three weeks.
U.S. futures pointed to a fall of around a third of one
percent on Wall Street ESc1 SPc1 . Shares in Walt Disney Co.
DIS.N were down nearly 5 percent in pre-market trade after
reporting a rare earnings miss late on Tuesday
"I'm still in the bearish camp, and any rallies on the
market are for selling," said Terry Torrison, managing director
at Monaco-based McLaren Securities. "Some company results have
beaten expectations, but you have to remember by just how much
some of these expectations had already been lowered."
Financial services were among the biggest losers in Europe.
Their 2 percent fall .SX7P was led by a 10 percent plunge in
Austria's Raiffeisen Bank International RBIV.VI after it said
it would look into a possible merger with RZB.
Shares in outdoor advertising firm JC Decaux JCDX.PA
slumped nearly 10 percent after it issued a weak second-quarter
outlook. Several investment banks cut their ratings and price
targets on the stock.
The FTSEuroFirst 300, German DAX and fFench CAC 40 .FCHI
were all down around 1 percent. Britain's FTSE 100 slipped 0.1
percent lower.
MSCI's broadest index of Asia-Pacific shares outside Japan
.MIAPJ0000PUS also fell 0.1 percent. It has risen only one day
in the last three weeks and on Tuesday it hit an eight-week low.
Japanese shares ended flat, with the Nikkei .N225
relinquishing earlier gains as a rally in the yen gathered
steam.
MSCI's broad gauge of global stocks .MIWD00000PUS fell,
too. On Tuesday it had climbed nearly 1.1 percent, its best
session in about a month, in large part driven by the S&P 500's
.SPX best day in two months, a 1.3 percent rise.
MARATHON, NOT A SPRINT
In currency markets, the dollar weakened, led by losses
against the yen. The U.S. currency had risen to a two-week high
after an economic adviser to Prime Minister Shinzo Abe told
Reuters on Tuesday that Japan would intervene if the yen
strengthened to 90 to 95 per dollar.
But dealers locked in profits on Wednesday, pushing the
dollar down 0.7 percent to 108.50 yen JPY= . Last week the
Japanese currency hit an 18-month high of 105.55 per dollar.
"The recent rise in dollar/yen might be seen as a victory
for the Bank of Japan but, perhaps unfortunately, this looks
more like a marathon than a sprint," said Steve Barrow, head of
G10 strategy at Standard Bank.
The euro EUR= rose 0.2 percent on the day to $1.1390. Last
week, it traded at $1.16, its highest this year.
The dollar's index against a basket of six major currencies
.DXY was down a quarter of one percent at 94.070, easing back
from Tuesday's two-week high of 94.150.
Bonds remained well-supported, indicating investors were
wary about riskier assets in an environment of sluggish global
growth.
An auction of three-year U.S. notes on Tuesday was received
well. Yields on 10-year debt US10YT=RR were at 1.75 percent,
not far away from a 2016 low of 1.53 percent.
German government bonds also reflected the cautious
undertone. Ten-year yields EU10YT=RR were down a basis point
at 0.11 percent.
Longer-dated yields on peripheral Spanish and Italian bonds,
however, climbed to multi-month highs on Wednesday as Spain
began the sale of a 50-year bond and investors anticipated Italy
might soon do the same.
Spain's benchmark 30-year bond yields rose to a two-month
high of 2.95 percent ES30YT=TWEB and Italy's rose as high as
2.78 percent IT30YT=TWEB . Spain received orders of over 10
billion euros for its bond.
In commodities, oil prices see-sawed after Tuesday's rally
of around 4 percent. Brent crude futures LCOc1 were last up 1
percent at $46.00 per barrel and U.S. crude futures CLc1 were
up 0.3 percent at $44.80 per barrel. Both had opened the
European day around 1 percent lower.
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Shanghai CSI 300 and global effects interactive https://t.co/YqIYLIbInP
Chinese A-shares vs developed and emerging stocks http://link.reuters.com/rac25w
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