July 31, 2012 / 3:28 AM / 6 years ago

Shares, oil dip as central bank hopes seen overblown

A trader poses in front of a screen on a trading floor in London January 22, 2010. REUTERS/Stefan Wermuth

LONDON (Reuters) - European shares ended a three-day rally and oil dipped on Tuesday as investors feared a recent rally built on anticipation of new stimulus measures from central banks in the United States and Europe may have been overdone.

Speculation had centered on hopes the European Central Bank would announce a resumption of its bond buying program at a meeting on Thursday to force down rising Spanish and Italian borrowing costs, despite German opposition to the move.

“Given the expectations ... and some disagreement in relevant policy circles over how far to push central bank support for stressed euro zone sovereigns, it is not inconceivable that the policy announcement will fall short of market hopes,” analysts at Barclays Capital said in a note to clients.

The Fed, which also holds a rate setting meeting this week, has itself been under renewed pressure to support flagging growth, though many economists do not see it announcing further easing measures until September.

The FTSEurofirst 300 index .FTEU3 of top European companies was down 0.1 percent at 1,071.44 points in early trading, having soared more than 5 percent in the previous three sessions.

The growing caution saw Brent Crude slide 0.4 percent to be at $105.78 a barrel, while German government bond prices ticked up to send the yield on the 10-year bond down 1 basis point to around 1.36 percent.

The single currency was steady at $1.2267, below its high of $1.2390 hit last Friday.

Reporting by Richard Hubbard; Editing by Will Waterman

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