Reuters: US Dollar Report: GLOBAL MARKETS-Stocks slip, euro dips before German ruling, Fed

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GLOBAL MARKETS-Stocks slip, euro dips before German ruling, Fed Sep 10th 2012, 17:14 Mon Sep 10, 2012 1:14pm EDT * S&P 500 stock index hovers just below four-year high * Talk of Fed easing after weak U.S. jobs report tempers moves * Euro off four-month high; German court decision due Wednesday * China imports slip from year ago By Ellen Freilich NEW YORK, Sept 10 (Reuters) - U.S. stocks weakened slightly o n M onday while the euro dipped below four-month highs and U.S. Treasury yields rose narrowly before potential new stimulus from the U.S. Federal Reserve and the European Central Bank. Markets are waiting for the Fed's decision at the end of its two-day policy meeting on Thursday and, a day earlier, a German constitutional court ruling on whether Germany may contribute to the euro zone's rescue fund. The ruling is crucial to the ECB's plan to contain the borrowing costs of Spain and Italy. "The market is taking a breather today, waiting on positive news from Europe and the Fed," said Joe Benanti, managing director of Rosenblatt Securities in New York. The Dow Jones industrial average was up 8.45 points, or 0.06 percent, at 13,315.09. The Standard & Poor's 500 Index was down 0.91 points, or 0.06 percent, at 1,437.01. The Nasdaq Composite Index was down 13.59 points, or 0.43 percent, at 3,122.84. American International Group Inc shed 1.4 percent to $33.50 after the U.S. Treasury Department said it will sell most of its stake in the insurer, making the government a minority investor for the first time since it rescued the company in the depths of the financial crisis four years ago. China reported its imports fell 2.6 percent in August from a year earlier, contrary to expectations of a 3.5 percent rise. "Bulls got a little bit of cold feet on weak economic data from China," said Steven Ricchiuto, chief economist at Mizuho Securities USA. Dutch elections on Wednesday could also affect investors' outlook if voters in the Netherlands elect a government less committed to the euro currency union. Stocks rose to four-year highs last week after the ECB said it was ready to buy an unlimited amount of bonds. The ECB news sent European shares to a 13-month high and the euro to a four-month peak. The euro was down 0.14 percent at $1.2789 on Monday but still near Friday's high of $1.2817, its strongest since May. Talk of Fed easing limited the downside. The MSCI index of top global shares was down 0.13 percent. Stock markets in London, Paris and Frankfurt slipped slightly. The benchmark S&P 500 index rose 2.2 percent last week, its biggest weekly gain in three months, on increasing expectations of more stimulus measures, fed by a weaker-than-forecast U.S. jobs report on Friday. U.S. Treasuries prices were little changed. Long-dated Treasuries modestly underperformed as investors bet a third bond purchase program in the United States would stoke higher inflation expectations. The Fed is seen likely to launch a new quantitative easing program when it meets this week as it struggles with a stubbornly high jobless rate and sluggish U.S. economy. The benchmark 10-year U.S. Treasury note was down 3/32, the yield at 1.6781 percent. Gold stayed near six-month highs after last week's softer U.S. jobs report heightened expectations for more monetary easing from the Fed. Spot gold stood at $1,730.31 an ounce, having risen last week by 2.7 percent, its third straight weekly gain and its longest stretch of gains since the start of the year. Since the Fed first used bond purchases as a means to encourage growth in late 2008, gold has more than doubled in value, hitting a record $1,920.30 an ounce last September. Deutsche Bank analysts expect gold price to average $1,726 an ounce this year before rallying to $2,000 early next year, making their outlook one of the more bullish from a Reuters mid-year price survey in July. Expectations of further Fed action have increased since Chairman Ben Bernanke said in a speech at Jackson Hole, Wyoming, that high unemployment is a "grave concern" and that the bank would act as needed to strengthen the economic recovery. "The Fed is looking for a much more substantial improvement in the labor market," said Zach Pandl, interest rate strategist at Columbia Management. "It's difficult for Treasury yields with the economic environment supportive for Fed easing." In oil trading, Brent crude futures for October delivery were up 0.06 percent at $114.32 per barrel. U.S. crude was down 0.48 percent at $95.96 per barrel. Link this Share this Digg this Email Reprints

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