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09:10 GMT: Gold hit another high on Wednesday but stock markets struggled to gain momentum as the dollar resumed its slide.

Bullion struck a new peak of $1,146.95, though it later traded up 0.3 per cent at $1,145.35 an ounce. It had advanced strongly late on Tuesday despite the dollar also gaining ground. The move challenged recent market convention that a weak dollar was good for riskier assets and vice versa.

However, in early trade on Wednesday, the dollar reverted to recent type, losing 0.3 per cent to $1.4922 versus the euro. On a trade-weighted basis the dollar was also off 0.3 per cent to 75.09.

Other commodities followed in gold’s wake. Copper moved back to near 14-month highs, up 1.1 per cent at $3.142 a pound, while oil was up 0.7 per cent at $79.69 a barrel. Inventory data on the energy complex will be released in the US later on Wednesday.

Stock market traders appeared more circumspect, however, after Wall Street managed to turn a loss into a small gain overnight. The S&P 500 added just 1 point to 1,110.3, though equity futures on Wednesday were suggesting it would lose that gain at the opening bell.

In Europe, equity trading was subdued. The FTSE 100 climbed 0.1 per cent to 5,351.3, while the FTSE Eurofirst 300 added 0.3 per cent to 1,032.7.

The apparent reticence to engage in an early “Santa Claus rally” and push equities to fresh highs for the year had led Asian markets to put in a mixed performance.

The Nikkei in Tokyo finished down 0.6 per cent at 9,676.8, a six-week closing trough, as worries about a potential bankruptcy for Japanese Airlines resurfaced. Sentiment was also affected by fears of further fund-raisings by financial institutions. There was one piece of good news, however. The yield on the the Japanese 10-year benchmark sovereign bond fell another 0.5 basis points to 1.310, thereby potentially easing funding woes for the fiscally-strapped government.

Mainland China’s benchmark, the Shanghai Composite, added 0.6 per cent to 3,303.2, but Hong Kong’s Hang Seng fell 0.3 per cent to 22,840.3, after again popping above the 23,000 level.

South Korea’s Kospi index closed at a three-week high, rising 1.1 per cent to 1,603.9, ahead of President Barack Obama’s visit. In Australia, the S&P/ASX 200 was firmer by 0.2 per cent at 4,739.0.

In government bonds, the benchmark US 10-year Treasury yield was up 1.8 basis points to 3.324 per cent. The German 10-year bund yield rose by 1.7 basis points to 3.298 per cent.

DATA WATCH. In the UK, the minutes of the last Bank of England monetary policy committee meeting will be scoured for any clues about the outlook for quantitative easing.

Investors want to see Federal Reserve monetary policy remain loose for longer, so any signs of surprising strength in inflation will be most unwelcome. The US consumer price index is forecast to have risen 0.1 per cent month-on-month in October. The yearly increase is expected to be 0.3 per cent.

US housing starts numbers will be released at the same time. Analysts think ground will have been broken on 600,000 units in October.

 The global risky-asset rally was suffering a hangover on Tuesday following the exuberance of the previous session.

After hitting new highs for the year on Monday, European bourses opened lower, mimicking Asian stocks’ slide into the red, as commodity prices pulled back on a firmer dollar.

The FTSE 100 in London fell 0.3 per cent from its 13-month closing high to trade at 5358.5. The FTSE Eurofirst 300 was flat at 1034.1, with banks and real estate stocks struggling.

US equity indices had provided fresh impetus to early Asian trade after the S&P 500 index closed up 1.5 per cent at a new peak for 2009 on well-received retail sales numbers. However, profit-taking set in across much of the region as the dollar again showed signs of life.

The greenback had been volatile on Monday as traders reacted to comments from Fed chairman Ben Bernanke, at one stage hitting a fresh 15-month low of 74.67 on a trade-weighted basis before bouncing a touch. On Tuesday the dollar was up 0.2 per cent at 75.07 and up 0.3 versus the euro at $1.4928 having again breached $1.50 in the previous session.

The dollar’s mini-revival took the wind out of the commodity rally. Gold retreated from Monday’s all-time high of $1,143.25 to trade down 0.5 per cent at $1,132.95 an ounce. Oil was down 0.6 per cent at $78.46 having flirted with $80 a barrel the day before. Copper dropped 0.6 per cent at $3.08 per/lb.

The Nikkei 225 in Tokyo fell 0.6 per cent to 9,729.5, with the yen’s strength – Y89.01 to the dollar, up 0.1 per cent – again damping sentiment.

Mainland China’s benchmark, the Shanghai Composite, managed a rise of 0.2 per cent at 3,282.9, while Hong Kong’s Hang Seng lost 0.1 per cent per cent to 22,914.2. In Australia, the S&P/ASX 200 gave up 0.5 per cent to 4,729 on weaker financials.

US equity futures currently point to the S&P 500 falling 3 points at the opening bell. Wall Street’s measure of investor anxiety, the Vix index, is sitting at 22.89 having fallen 2 per cent on Monday.

The benchmark US 10-year Treasury yield rose 1.7 basis points to 3.364 per cent, while the yield on Japan’s 10-year JGB fell 2.5bp at 1.315 per cent.

The UK government bond yield curve flattened after the data for consumer price inflation was published. CPI rose between September and October by 0.2 per cent , a touch stronger than expected. Yearly CPI hit 1.5 per cent. The 10-year gilt yield fell 2 basis points to 3.730 per cent. The more intrerest rate sensitive 2-year gilt saw its yield rise 2bp to 1.339 per cent. Sterling hit a two-month high versus the euro, rising 0.4 per cent to 88.63p.

The Euro gained by 0.4% versus the Dollar the past week keeping with the uptrend, but a failure to break above the 1.5050 level may signal a forming of a double top in the EUR/USD that could lead to sharp declines in the Euro. German Prelim GDP was released weaker than expected with 0.7% but still showed growth. Overall, EUR/USD traded with a high of 1.5047 and a low of 1.4820. Looking ahead, European CPI is expected unchanged with -0.1% and will be released on Monday. Trade Balance is expected with -0.9B versus 1B prior and will be released on Tuesday. German PPI is expected higher with 0.1% versus -0.5% prior on Friday.

The Pound gained 0.4% versus the Dollar after holding above key technical support levels. Fitch Ratings held a cautious outlook for the U.K and said the AAA credit rating is at risk. Overall, GBP/USD traded with a high of 1.6843 and a low of 1.6515. Looking ahead, CPI on Tuesday is expected stronger with 1.4% versus 1.1% prior. MPC Meeting Minutes will be released on Wednesday along with CBI Industrial Order Expectations. Retail Sales are expected stronger with 0.6% versus 0% prior on Thursday.