Reuters: US Dollar Report: GLOBAL MARKETS-Stocks dip, long bond gains as Fed 'Twists' again

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GLOBAL MARKETS-Stocks dip, long bond gains as Fed 'Twists' again Jun 20th 2012, 19:31 Wed Jun 20, 2012 3:31pm EDT * Fed extends bond-buying program * U.S. stocks fall in choppy trade; some expected more from Fed * Signs of progress in Europe help peripheral bonds By Steven C. Johnson NEW YORK, June 20 (Reuters) - Major stock indexes fell on W ednesday while Treasuries trimmed losses after the Federal Reserve extended monetary stimulus to keep the U.S. recovery from stalling. Analysts said investors had expected the U.S. central bank to extend its bond-buying program - dubbed "Operation Twist" - but said some were disappointed that it stopped short of more aggressive measures to boost growth in the face of slower U.S. hiring and a festering European debt crisis. In Operation Twist, which was to end this month, the Fed sells short-term debt it holds to buy longer-term bonds in hopes of lowering long-term borrowing costs. Fed Chairman Ben Bernanke said that policymakers were ready and able to do more if needed, reiterating what he said in the past, but offered few specifics. "The most dovish investors were looking for something a little more concrete about the path to more easing, but so far, Bernanke has sounded non-committal," said Standard Chartered currency strategist Mike Moran. "He's leaving the door ajar, but that's still a slight disappointment for some." John Canally, investment strategist and economist at LPL Financial, said "there were a lot of guys out there with the finger on the 'sell' button unless they saw balance-sheet expansion." The Fed's caution cleared the way for investors to take profits after four straight days of U.S. stock gains. With half an hour of trading left, the Dow Jones industrial average was down 49.65 points, or 0.39 percent, at 12,787.68. The Standard & Poor's 500 Index was down 6.24 points, or 0.46 percent, at 1,351.74. The Nasdaq Composite Index was down 9.76 points, or 0.33 percent, at 2,920.00. The MSCI index of global stocks reversed earlier gains to fall 0.1 percent. The euro fell 0.2 percent to $1.2661 as profit-taking erased earlier support from reports that Greek conservatives had succeeded in forming a coalition government. Bond prices also swung from gains to losses throughout the day, with the 30-year Treasury bond last up 13/32 to yield 2.71 percent. The benchmark 10-year U.S. Treasury note was down 4/32, the yield at 1.63 percent. U.S. crude oil for July delivery fell $2.23, or 2.65 percent, to $81.06 per barrel. The July contract will expire at Wednesday's close. "Crude futures have been following the stock markets, which have been strong in anticipation of the Fed move," said Mark Anderle, trader for TAC Energy in Dallas. "Now that the Fed's done it, we're going through the 'buy the rumor, sell the news' phase." SIGNS OF PROGRESS IN EUROPE Whatever disappointment markets felt after the Fed was tempered by signs that Europe's leaders were making progress on a long-term plan to resolve the continent's debt crisis. The FTSE Eurofirst 300 index of top European shares rose 0.5 percent after hitting a one-month high in the previous session. German government bond yields also retreated from record lows after European leaders said they were aiming to hammer out a plan next week to integrate the region's banking sectors. The United States and other nations have long urged Europe to embrace common banking supervision and deposit insurance to break the cycle of indebted governments having to take on more debt to bail out troubled banks. A proposal to use the euro zone's new rescue fund to buy sovereign debt and reduce governments' borrowing costs helped ease selling pressure on other European bond markets. Spain's 10-year government bond yield, a gauge of the compensation investors demand to lend to the government, fell 27 basis points to 6.93 percent. The equivalent Italian yield fell 15 basis points to 5.77 percent. Spot gold fell $15.17, or 0.94 percent, to $1602.20. Gold hit its 2012 high around $1,790 in February when the Fed said it would keep interest rates near zero through 2014. Link this Share this Digg this Email Reprints

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