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GLOBAL MARKETS-Stocks down, yen hits 8-mth high

Published 09/28/2009, 04:37 AM
Updated 09/28/2009, 04:39 AM
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* MSCI world equity index down 0.57 percent post-U.S. data, G20

* European stocks down, German election boosts energy stocks

* Yen hits eight-month high against dollar

By Carolyn Cohn

LONDON, Sept 28 (Reuters) - World stocks fell for a third straight day on Monday, depressed by recent weak U.S. economic data and failing to find support from the G20 summit, and the yen hit an eight-month high against the dollar.

Weaker-than-expected U.S. housing sales and durable goods orders on Friday drove U.S. stocks lower, and world and European stocks followed that trend through on Monday.

G20 leaders pledged on Friday to bring the global economy back into balance, but their statement contained few surprises, and investors are already looking ahead to key U.S. employment data at the end of this week.

Global equities and other risky assets have risen sharply in the last six months on growing optimism about the economic outlook, but markets are starting to run out of impetus, analysts say.

"Wednesday of last week may turn out to be one of the days that you look back on as a turning point and remember for a long while," said RBS analysts in a client note.

"The price action in U.S. equities indicated that a reversal in the rally in risk assets is at hand."

The MSCI world equity index was down 0.58 percent at 282.75, bringing losses since last Tuesday to 3 percent.

The FTSEurofirst 300 index fell broadly, by 0.73 percent.

But German energy stocks E.ON and RWE rose more than 2 percent, with analysts saying there would be potentially longer lifetimes for German nuclear power plants as a result of the German election.

German Chancellor Angela Merkel's conservatives won a weekend parliamentary election with the pro-business Free Democrats (FDPP), enabling her to end her awkward four-year-old partnership with the Social Democrats (SPD).

"The election outcome should be good for utilities," said UBS analyst Martin Lueck.

The yen, typically regarded as a safe-haven currency, surged to an eight-month high against the dollar as Japanese officials waved off any plans to stem the currency's rise.

The yen later gave up some gains as Finance Minister Hirohisa Fujii changed gears on his comments during the course of the day, saying yen gains were becoming one-sided just hours after saying the rise was "not abnormal".

"(Fujii) tried to calm the market a bit, but he doesn't seem to have changed his position (on intervention)," said Lutz Karporwitz, currency strategist at Commerzbank in Frankfurt.

"It looks like fund repatriation and the lack of fear of intervention is fitting the framework for a stronger yen, at least for now."

The dollar fell as far as 88.26 yen before trimming losses to 89.56, down 0.10 percent.

However, the dollar hit a 2-1/2 week high against an index of currencies and a 13-day high against the euro as the U.S. currency also attracted safe-haven flows.

Funds are starting to shift money home ahead of the quarter-end later this week, analysts say.

Gold prices traded below $990 and crude oil lost 50 cents to $65.52 a barrel.

Euro zone government bonds also benefited from safety trades, with 10-year yields briefly hitting a one-month low.

December Bund futures rose 21 ticks.

(Additional reporting by Tyler Sitte in Frankfurt and Naomi Tajitsu in London; Editing by Andy Bruce)

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