LONDON (Reuters) - European shares and the single currency held within narrow ranges on Wednesday as investors' fears over Spain eased and growth hopes rose, with the focus on a two-year German bond sale, which some fear could struggle, given ultra-low yields.
Strong demand at a Spanish bill auction on Tuesday soothed fears of a flare up in the euro zone crisis, but the rise in short-term borrowing costs underscored the challenges still facing the highly indebted country.
Spain will also auction two- and 10-year bonds on Thursday, while France, where uncertainty over the outcome of a presidential election is rising, is also due to sell debt.
"Markets are undergoing a consolidation phase after a strong rally earlier in the year, and if Spain's bond auctions on Thursday pass without a problem, investors will likely become more committed to risk-taking," said Hirokazu Yuihama, a senior strategist at Daiwa Securities in Tokyo.
German Bund futures were 12 ticks higher at 140.08, while the existing March 2014 bond was yielding only 0.16 percent in the secondary market.
In equity markets the well-supported Spanish debt sale, signs of strong growth in Germany and positive U.S. corporate earnings releases were supporting prices, but the major share indexes eased slightly after the previous day's strong gains.
The euro zone blue-chip Euro STOXX 50 index, which saw its biggest daily gain of the year on Tuesday, retreated slightly to be down 0.4 percent at 2,357.93. The FTSE Eurofirst index of top European shares opened down 0.1 percent at 1052.61.
The euro was down 0.15 percent at $1.3105, while the dollar index measured against a basket of major currencies was up 0.3 percent at 79.72.
(by Richard Hubbard; Editing by Will Waterman)
