* Shares flat ahead of Bernanke testimony on Wednesday, Home
Depot rallies
* Dollar index firmer, but down from near 3-year high
* Yen dips after Japanese minister says seeks 'balance' for
currency
By Ryan Vlastelica
NEW YORK, May 21 (Reuters) - Stock markets around the world
were little changed on Tuesday as investors awaited an update on
the future of the U.S. Federal Reserve's stimulus program.
U.S. shares continued to hover around five-year highs while
the dollar rose and gold fell. The euro was weaker, and a
slowdown in British inflation sent sterling to a 7-week low on
the view it could give the Bank of England more leeway to
support the economy. The yen lost ground after a Japanese
minister rowed back on remarks suggesting the currency had
weakened enough.
The constant drip of global central bank stimulus during the
financial crisis has pushed many financial markets to their
highest levels in years and limited market declines, but in
recent weeks Fed officials have started talking more openly
about scaling back the bank's support.
That has made Wednesday's release of minutes from the
central bank's last meeting and Fed chairman Ben Bernanke's
testimony in Congress the main focus for markets waiting for the
first signs of a clear shift in attitude.
Markets are "nervous" ahead of the testimony, "but not
enough to take any action," said Kim Forrest, senior equity
research analyst at Fort Pitt Capital Group in Pittsburgh.
Economists expect Bernanke to deliver a steady message on
the bank's policy when he speaks to Congress. But any hint that
it plans to scale back its support could unsettle markets.
The usually dovish Chicago Fed president Charles Evans said
on Monday that while the pickup in the U.S. jobs market
continued he was "open-minded" about slowing the bank's
bond-buying, and mentioned the idea of simply halting it.
"With the economic numbers being pretty good in the States,
there may be an easing back of QE (bond-buying stimulus) sooner
rather than later," said Berkeley Futures associate director
Richard Griffiths.
The dollar was up 0.4 percent against a basket of
major currencies at midday in Europe, comfortably below its
recent three-year high.
The Dow Jones industrial average was up 54.37 points,
or 0.35 percent, at 15,389.65. The Standard & Poor's 500 Index
was up 4.48 points, or 0.27 percent, at 1,670.77. The
Nasdaq Composite Index was up 6.29 points, or 0.18
percent, at 3,502.75.
U.S. equities were supported by Home Depot, which
raised its full-year profit outlook as it benefited from a
recovery in the housing market.
Having hit a five-year high on Monday, top European shares
were flat as traders took the uncertainty as a cue to
lock in some of the recent sharp gains.
The benchmark 10-year U.S. Treasury note was
down 8/32, with the yield at 1.991 percent.
GREECE LIGHTENING
If the Fed does tighten policy by slowing its bond-buying,
benchmark bond yields would be pushed up, and in the debt
market, safe-haven German Bund futures lost ground,
dropping 0.4 percent.
In Greece, 10-year yields fell below 30-year ones for the
first time in three years - popping its bond curve back into a
more normal shape in a sign that some are starting to believe
the worst may be over for the euro zone's most troubled economy.
"The perception of investors has changed," said ING
strategist Alessandro Giansanti in Amsterdam. "There has been a
change in trend in public finance policies. If the trend of
reduction in the deficit continues we cannot rule out that even
next year (Greece) can come back to the market."
YEN, METALS YO-YO
Earlier in the day, Japan's Nikkei share index crept to a
5-1/2 year high. The yen shed some of Monday's gains
after Japan's economy minister said his comments the previous
day that the government was satisfied with the level of the
currency had been misinterpreted.
A recent downward slide in precious metals also resumed.
Gold was down 2.4 percent as the stronger dollar left it
facing its eighth fall in nine sessions. Silver dropped more
than 3 percent.
While low inflation prospects has dulled demand for
traditional hedge gold, silver has fallen out of favour with
investors recently as demand from the solar energy sector has
also sagged and mining of the metal has increased.
"The market was caught horribly short yesterday, so there
was some buying this morning. But the dollar started to get
stronger and gold didn't manage to break above $1,400, so sales
started again," Marex Spectron head trader David Govett said.
