By Huw Jones

LONDON (Reuters) – European markets were subdued on Wednesday, with Germany’s weaker economic sentiment data failing to inspire investors who kept their powder dry ahead of a Federal Reserve speech on Friday.

The STOXX index of 600 European companies, nudged 0.15% higher to 472.51 points, less than four points from its record high from earlier this month. Fund managers expect European stocks to hold around current record levels for the rest of 2021, a Reuters poll showed.

Business morale in Germany, Europe’s biggest economy, fell for the second month running in August, pointing to a loss of momentum due to worries over COVID and supply bottlenecks.

But investors shrugged off the news, with the blue chip stock index in Frankfurt slightly firmer, little changed after the Ifo Institute data.

Instead, markets globally were looking ahead to Friday, when Jerome Powell, chair of the U.S. Federal Reserve, is due to speak at the annual Jackson Hole event. There have been high expectations that he might indicate when the central bank could begin “tapering” or easing stimulus to an economy now recovering from COVID-19.

But Michael Hewson, chief markets anlayst at CMC Markets, said he expected “nothing” from the Fed on Friday, adding that investor concerns about Fed tapering had eased.

“The Fed has always been data dependent and the U.S. August payrolls report due in September will be more important than Jackson Hole,” Hewson said.

While data remains robust, there are clear signs the global economy is losing momentum, following an early-2021 rebound from last year’s pandemic-driven slump.

Citi’s global economic surprise index, which measures the degree to which the data is beating or missing economists’ forecasts, this week turned negative for the first time since last June, indicating more misses than beats. The equivalent U.S. and Chinese indexes turned negative some weeks ago.

Graphic: Global economic surprises – https://fingfx.thomsonreuters.com/gfx/mkt/akpezzedzvr/Pasted%20image%201629875940713.png

Asian shares held onto their recent gains on Wednesday after last week’s pummelling, as global equities rebounded, though the focus for most asset classes was on the upcoming Fed event.

MSCI’s broadest index of Asia-Pacific shares outside Japan spent most of the day near flat, but was last up 0.37%, and about 4% higher so far this week.

This marks a change from last week, when the index fell to its lowest in 2021, spooked by a combination of fears about slowing growth in Asia amid outbreaks of the Delta variant of the new coronavirus, and worries the Fed might begin shrinking its monetary stimulus sooner rather than later.

was also flat, but a Reuters poll of analysts and fund managers showed Japanese shares are expected to recover from their eight-month low marked on Friday to near a 30-year high by the end of this year.

Chinese regulatory crackdowns that have roiled sectors from technology to property, also weighed on shares in Hong Kong and mainland China, dragging on the broader Asian index.

The yield on benchmark was last at 1.2952%, little changed from a U.S. close of 1.29%, having touched as high as 1.304% earlier in the session.

The dollar was near a one-week low versus major peers amid easing concerns that the highly contagious Delta coronavirus variant could derail a global economic recovery.

dipped 0.2% to $67.39 a barrel, while was little changed at $70.98 per barrel. Both are up around 8% on the week, however, after posting their biggest weekly decline in more than nine months last week. [O/R]

Safe-haven gold fell in tandem with the broad increase in risk appetite, with the spot price dropping 0.45% to $1,794 per ounce. [GOL/]