LONDON, July 22: The euro gained broadly in technically driven trade on Tuesday as markets puzzled over how to interpret a simultaneous fall in stock and bond prices in light of recent bets investors made on global equities growth.

US equities promise to be a factor in trade later, with Wall Street futures pointing higher and about a third of the Standard & Poor’s 500 reporting this week. But rising bond yields have made investors wary of adopting the recovery story.

The Nikkei average, on a downtrend since a Japanese share rally fizzled earlier this month, ended down nearly half a percent on Tuesday. US stocks ended down at least one percent, while US bond yields hit seven-month highs on Monday.

At the moment the market is not sure which way to go because the equities picture is not corroborating the signal from the bond market about the prospects for growth, said Steven Pearson, chief currency strategist at Halifax Bank of Scotland Treasury Services.

This is a fairly confused picture. While stocks and bonds are falling together, the foreign exchange market reaction will be fairly limited. If we were to see stocks rising and bonds falling then that will be dollar positive.

The yen was the biggest loser on the day, sliding to a three-week low of 119.33 against the dollar and a two-week low of 135.45 per euro by 1200 GMT.

It was also hit by comments from Japan’s top official for foreign exchange, Zembei Mizoguchi, who said volatile and excessive moves in the currency markets were undesirable. This was seen by the market as a warning against yen strength.

The dollar also adopted a softer bias on the euro, sliding to its lowest level in a week at $1.1372, well over two cents below the 2-1/2-month high it hit on the single currency last week.

In an earnings-heavy week for US equities, Amazon and Sun Microsystems are among those issuing results on Tuesday.

US Treasury prices plummeted on Monday, in a move triggered by the Federal Reserve’s meagre quarter-point interest rate cut last month, and by Fed Chairman Alan Greenspan’s upbeat Congressional testimony last week.

In the euro zone, German industry orders were revised down to a drop of 2.6 per cent in May.

Bank of France chief Jean-Claude Trichet said in an interview in a Polish daily that deflation was still not a threat in the euro zone.

The back-up in the yen is a delayed reaction after Monday’s holiday, related to Snow’s comments, said Ryan Shea, senior international economist at Bank One.

There is no real US data until durable goods on Friday, so people are looking at the earnings reports for signs of a US recovery, and also at US Treasuries.—Reuters