GLOBAL MARKETS-Stocks lower as gold jumps to record

Published 09/16/2010, 12:56 PM
Updated 09/16/2010, 01:00 PM
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* World stocks weaken after U.S. data

* Gold rises to record highs on safe-haven bid

* Currency intervention concerns continue (Updates with European markets' close)

By Manuela Badawy

NEW YORK, Sept 16 (Reuters) - World stocks fell on Thursday as data showed the U.S. economy's recovery remained halting, while the dollar was flat against the yen a day after Japan's huge intervention to weaken its currency.

Gold rose to a record high above $1,275 per ounce as jitters about any further yen selling and broader economic uncertainty enticed more investors to the safe-haven commodity.

U.S. government bond prices fell after Philadelphia Federal Reserve data suggested business conditions contracted in the U.S. Mid-Atlantic region in August, though not as severely as in July, while U.S. weekly claims for unemployment benefits dropped to a two-month low but still remained high.

"All the ingredients are still there, all the uncertainty and fear, to keep gold underpinned." said Robin Bhar, analyst at Credit Agricole in London.

Investors remained worried that high U.S. jobless numbers, despite falls in weekly insurance claims, would signal a slowdown in the pace of the economic recovery.

The Dow Jones industrial average <.DJI> was down 28.57 points, or 0.27 percent, at 10,544.16. The Standard & Poor's 500 Index <.SPX> was down 6.17 points, or 0.55 percent, at 1,118.90. The Nasdaq Composite Index <.IXIC> was down 12.48 points, or 0.54 percent, at 2,288.84.

The FTSEurofirst 300 <.FTEU3> index of top European shares ended 0.8 percent lower to hit its lowest closing level in a week after disappointing British retail sales in August, a sign the UK economy was on a slow growth path.

"Times are difficult because of the combination of high unemployment, banks not lending yet and governments starting to implement austerity measures. All these factors are not going to be resolved overnight," said Franz Weis, a fund manager at Comgest in Paris.

MSCI's All-Country World Index <.MIWD00000PUS> was down 0.51 percent, while Tokyo's benchmark Nikkei stock index <.N225> ended down 0.07 percent.

YEN TALK

Investors were jittery after Wednesday's currency intervention by Japan, its first in six years, that knocked the yen from a 15-year high versus the dollar. The Bank of Japan's money market data showed the yen-selling intervention may have totaled around 1.76 trillion to 1.86 trillion yen ($20.52-21.69 billion). [ID:nTKW007123]

Adding to investor nerves, Japanese Prime Minister Naoto Kan pointed to more potential yen selling.

In midday trading, the dollar was down 0.05 percent at 85.69 from a previous session close of 85.73.

"Things have been quiet on the intervention front so far today. Clients are hesitant at this point to touch dollar/yen in either direction," said Amelia Bourdeau, senior currency strategist at UBS AG in Stamford, Connecticut.

Wednesday's move was designed to protect Japanese exports from a too-competitive exchange rate and ward off job losses.

The euro rose to its highest in more than a month against the dollar to $1.3112 and was last trading up 0.55 percent at $1.3075, and against the yen it rose to 112.24 after strong demand at a Spanish bond auction reinforced confidence in Europe's sovereign issues.

Spain sold a combined 4 billion euros in 10-year and 30-year bonds, at the top of its targeted range, attracting solid demand and lower yields than its last auction in June. [ID:nLDE68E0YT]

The country was among those most in the limelight during the sovereign debt crisis earlier this year.

The Swiss franc weakened broadly after the Swiss National Bank kept interest rates unchanged as expected and forecast a slowdown in economic growth because of strength in the currency. [ID:nWEA8411]

BONDS AND COMMODITIES

The benchmark 10-year U.S. Treasury note was down 11/32, with the yield at 2.7626 percent after the Philadelphia Fed data on the U.S. Mid-Atlantic region.

The 2-year U.S. Treasury note was unchanged, with the yield at 0.4836 percent. The 30-year U.S. Treasury bond was down 31/32, with the yield at 3.932 percent.

Crude oil fell $1.61, or 2.1 percent, to $74.45 a barrel ahead of the expected reopening of a North American pipeline that will restore crude supplies to U.S. refiners.

Spot gold prices rose $6.70, or 0.53 percent, to $1274.20. Earlier on Thursday it hit a record $1,277.70 an ounce. U.S. December gold futures also rose to a historic high . (Additional reporting by Wanfeng Zhou in New York and Harpreet Bhal, Pratima Desai and Jeremy Gaunt in London; Editing by Padraic Cassidy)

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