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GLOBAL MARKETS-Crude climbs on economic data. stocks falter

Published 11/02/2009, 01:43 PM
Updated 11/02/2009, 01:45 PM
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* U.S. stocks falter amid fears of recovery won't last

* Dollar, yen fall after U.S. data boosts risk appetite

* Oil rises on strong U.S., China manufacturing data

* Bonds fall as improving data erodes safe-have appeal (Updates with U.S. markets, changes byline, dateline previously LONDON)

By Herbert Lash

NEW YORK, Nov 2 (Reuters) - Crude oil rebounded on Monday as strong factory activity worldwide and a surprise rise in U.S. pending home sales boosted risk appetite after last week's sell-off, but stocks faltered on fears the economic recovery is still on shaky ground.

The dollar and yen fell while government debt on both sides of the Atlantic slipped as the improving economic data worldwide and rising stock prices eroded the demand for the traditional safe-haven investments. For details, see: [ID:nN02386730][ID:nN02440702]

Gold climbed above $1,060 an ounce, near October's record high at one point, and copper rose on the falling dollar and strong manufacturing data from the euro zone, the United States and China, the world's largest consumer of industrial metals. [ID:nL2309004]

Oil rose as the factory data stoked optimism for a turnaround in the global economy and in fuel demand. [ID:nSYD489490]

U.S. stocks initially rose on the stronger-than-expected economic data, but turned course around midday and then recovered a bit to trade close to unchanged.

"I think we've got a situation where the smart people really believe the market should be sold here -- we need a real correction," said Jeffrey Frankel, president of Stuart Frankel & Co in New York.

Corporate results continued to outperform. Ford Motor Co shares jumped 9.1 percent after the U.S. auto maker posted a surprising quarterly profit on cost cuts, improved credit results and increased market share. [ID:nN02411585].

Shortly after 1 p.m., the Dow Jones industrial average <.DJI> was up 31.89 points, or 0.33 percent, at 9,744.62. The Standard & Poor's 500 Index <.SPX> was up 0.42 points, or 0.04 percent, at 1,036.61. The Nasdaq Composite Index <.IXIC> was down 7.11 points, or 0.35 percent, at 2,038.00.

European shares closed higher, boosted by the U.S. economic data, with commodities and banks the major gainers.

The pan-European FTSEurofirst 300 <.FTEU3> index of top shares closed up 0.4 to 980.28 points, having earlier been as low as 968.19 points.

U.S. bond market losses were short-lived because investors were looking ahead to other key data due this week and to what the Federal Reserve will say on Wednesday at the end of the Federal Open Market Committee's two-day policy meeting.

"We've had a reversal of some of last week's gains in Treasuries and a reversal of some of last week's losses in equities," said John Canavan, market analyst at Stone & McCarthy Research Associates in Princeton, New Jersey.

Euro zone government debt avoided a wider sell-off as equities failed to wrest big gains on caution ahead of major central bank meetings later in the week. Cash flows from redemptions of maturing bonds worth over 22 billion euros provided underlying support for bonds.

The benchmark 10-year U.S. Treasury note fell 3/32 in price to yield 3.40 percent.

In currencies, the dollar fell against a basket of major currencies, with the U.S. Dollar Index <.DXY> down 0.13 percent at 76.204.

The euro was up 0.38 percent at $1.4771, and against the yen, the dollar was up 0.14 percent at 90.21.

U.S. light sweet crude oil rose 49 cents, or 0.64 percent, to $77.49 per barrel.

Spot gold prices rose $11.80, or 1.13 percent, to $1,056.20.

Earlier in Asia, worries about the U.S. financial sector resurfaced after CIT Group Inc , the lender to small and mid-sized U.S. companies, filed for bankruptcy.

The MSCI index of Asia-Pacific shares outside Japan <.MIAPJ0000PUS> fell 1 percent to touch a one-month low. Japan's Nikkei average <.N225> dropped 2.3 percent, mirroring the 2.8 percent slide in the U.S. S&P 500 <.SPX> on Friday. (Reporting by Leah Schnurr, Wanfeng Zhou, Matthew Robinson and Ellen Freilich in New York; Emelia Sithole-Matarise and Joanne Frearson in London; writing by Herbert Lash; Editing by Leslie Adler)

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