World shares dipped on Monday and oil prices steadied due to investors' caution on whether the strength of the global economic recovery justifies the sharp rally so far this year.
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The wariness crept in before a series of significant U.S. economic events this week, including the first estimate of fourth quarter GDP, the Federal Reserve's first policy meeting of the year and January payrolls data.
"Markets don't go up in a straight line," said Garry Evans, global head of equity strategy at HSBC. "I think that people are realising there could still be problems out there."
MSCI's benchmark world share index was down 0.1 percent on Monday, although it has gained nearly 4.5 percent this month on signs of U.S. recovery, a stabilisation in the euro zone and renewed growth in China.
European stocks were little changed on Monday with the broad the FTSE Eurofirst 300 index of top company shares close to a two-year high.
The market's softer tone also followed a weaker session in Asia, where falls in technology companies saw the MSCI's broadest index of Asia-Pacific shares outside Japan drop 0.4 percent.
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However, U.S. stock index futures pointed to a slightly higher Wall Street open, with investors awaiting December data on durable goods orders and pending home sales.
EUROPEAN ECONOMY FLAT
Data from the European Central Bank gave another reminder that the recent jump in financial markets is not being matched in the real economy.
Lending by banks to euro zone companies, consumers and home buyers contracted in December for the eighth month running as recessions across much of the region sap the appetite to borrow and banks' willingness to lend.
"As of the end of 2012, there was no sign of improvement in credit flows," said Marie Diron, an economist who works on Ernst & Young's euro zone forecasts. "However, we think that during 2013, with a much more secure economic environment than last year, banks will start easing credit standards somewhat and companies will be more willing to borrow to invest in the euro zone."
Data showing inflows to global equity funds had slowed in the past week, and comments from several major investment banks noting signs that the market may be reaching a natural top added to the cautious tone.
Among the warning signs was Citigroup's U.S. Economic Surprise Indicator, which tracks how new data compares with expectations. This has turned negative, although the survey by the American Association of Individual Investors (AAII) remains in the top 5 percent of the observed readings.
JP Morgan said in a note that historical data for each of these readings shows they are normally followed by lacklustre equity returns.
The euro slipped from an 11-month high against the dollar to around $1.3435, down about 0.2 percent, as some people in the market worried about the implications of Friday's announcement that European banks would repay more than expected of the emergency loans they borrowed from the ECB.
The early repayments mean the ECB is the first major central bank to start moving away from unconventional monetary policy measures, unlike the U.S. Federal Reserve and Bank of Japan, which are buying bonds to stimulate growth. More stimulus usually weighs down on a currency as it increases its supply.
The dollar was down 0.2 percent against the yen at 90.70 yen , although the Japanese currency is expected to remain weak on expectations that Japan's government will keep pushing for aggressive monetary easing, whereas the Fed's view could change if the economic data strengthens.
In commodity markets oil prices steadied near a three-month high at just over $113 a barrel before the Fed meeting on Tuesday and Wednesday and the employment data on Friday that should show more signs of recovery in the world's biggest oil consumer.
Other commodities also rose on evidence that the world's number two economy China is now picking up pace, along with the general optimism about the euro zone, Japan's efforts to revive its stagnant economy and the signs of U.S. growth.
Growth-attuned palladium rose to $741.75 an ounce, its highest since September, 2011, leading climbs by platinum and copper, while traditional safe haven gold struggled near a two-week low.
"China's economic growth could be over 8 percent this year. China's economy supports a very large part of global demand," Lou Jiwei, chairman of the country's sovereign wealth fund said over the weekend.