Reuters: US Dollar Report: GLOBAL MARKETS-Stocks slip as Fed offers no new stimulus; dollar rallies

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GLOBAL MARKETS-Stocks slip as Fed offers no new stimulus; dollar rallies Aug 1st 2012, 18:53 Wed Aug 1, 2012 2:53pm EDT * Fed stops short of offering new monetary stimulus * Spanish yields could jump, euro fall if ECB disappoints * U.S. Chinese and European factory data point to slowing growth By Wanfeng Zhou NEW YORK, Aug 1 (Reuters) - U.S. stocks fell and the dollar rallied on Wednesday after the Federal Reserve stopped short of easing monetary policy further even as it acknowledged that the U.S. economic recovery has lost momentum so far this year. Risk assets have rallied lately and the S&P 500 posted its biggest two-day percentage gain of the year to close out last week on increased expectations the Fed would engage in another round of bond-buying, or quantitative easing, to stimulate growth. While the U.S. central bank showed it was prepared to do more to support an ailing economy, it disappointed market expectations by not extending further into the future its guidance for low rates until late 2014. Attention now turns to a European Central Bank decision on Thursday. ECB President Mario Draghi heightened speculation of further bank purchases of Italian and Spanish bonds when he said last week that he would do "whatever it takes to preserve the euro." "Kind of a disappointment. The market was hoping for more news on QE or a longer time frame for not raising rates," said Nicholas Colas, chief market strategist at the Convergex Group in New York. "It was very status quo at a time when people are saying the economy is getting worse," he said. "We have to now hope that the ECB will come in with aggressive moves." The U.S. central bank, which disappointed market expectations by not extending further into the future its guidance for low rates until late 2014, nevertheless showed it was prepared to do more to support an ailing economy. The Dow Jones industrial average was down 14.87 points, or 0.11 percent, at 12,993.81. The Standard & Poor's 500 Index was down 1.21 points, or 0.09 percent, at 1,378.11. The Nasdaq Composite Index was down 9.01 points, or 0.31 percent, at 2,930.51. The MSCI world equity index fell 0.3 percent to 315.52 points. European shares gained 0.5 percent to close at 1,068.20. The dollar rallied, with the euro falling 0.5 percent to $1.2236. The dollar gained 0.3 percent to 78.36 yen . "I do not expect follow-through U.S. dollar buying given the proximity to the ECB meeting where policy expectations are far from calm," said Alan Ruskin, head of G10 FX strategy at Deutsche Bank in New York. In government debt trading, the benchmark 10-year U.S. Treasury note was down 14/32 in price, with the yield at 1.5154 percent. Link this Share this Digg this Email Reprints

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