By Marc Jones LONDON (Reuters) - Risk appetite flickered back into life in financial markets on Tuesday with the dollar and European and Japanese shares rising while safe-haven bonds, the yen and gold all took a step back. The dollar rose to its highest since January against the yen and the euro sank to a one-year low against the greenback as another drop in euro zone producer prices heightened speculation about what the ECB will do when it meets on Thursday.
By Linda Sieg and Tetsushi Kajimoto TOKYO (Reuters) - Prime Minister Shinzo Abe's plan for Japan's economy to generate self-sustained growth on the back of his three policy "arrows" of massive monetary easing, spending and reform appears to be faltering - but no magic solution is in sight. Abe's aides and advisers are promising to forge ahead with painful structural reforms, while spreading the benefits of "Abenomics" to regional areas and drafting a long-term vision for addressing Japan's shrinking population. Failure could leave Japan's economy stuck in a low-growth mode or worse, unable to begin to curb public debt already more than twice the size of a $5 trillion economy, the biggest burden in the industrialized world. Most voters favor delaying next year's sales tax rise to 10 percent after an initial hike in April to 8 percent from 5 percent dented a fragile recovery.
By Eva Taylor FRANKFURT (Reuters) - Expectations for further policy action at the European Central Bank's meeting on Thursday are running high after ECB President Mario Draghi pledged to use all available tools to keep prices in check. Draghi told a central bank conference in Jackson Hole on Aug. 22 that financial market inflation expectations were falling significantly and the ECB would use "all available instruments needed to ensure price stability". In a dramatic departure from debt-cutting orthodoxy, he also said there was scope for fiscal policy - more government spending - to play a greater role in reviving growth, an apparent acknowledgement of the limits of the ECB's powers.
Dollar General Corp raised its bid for Family Dollar Stores Inc by 2 percent to $80 per share, or $9.1 billion, and warned it may turn hostile and appeal directly to shareholders if the new offer was rejected. Dollar General also said it would pay a break-up fee of $500 million if deal ran foul of competition law, the reason Family Dollar had cited for its rejection the earlier offer and opting instead for an $8.5 billion cash-and-stock bid from Dollar Tree Inc . Family Dollar's shares were up almost 1 percent at $80.50 in premarket trading, above Dollar General's cash offer, suggesting some investors held hopes of higher offers. "In the event you refuse to engage with us regarding our revised proposal, we will consider taking our persuasive and superior proposal directly to your shareholders," Dollar General Chief Executive Rick Dreiling said in a letter to Family Dollar's board on Tuesday.