Asian shares eke out slim gains, dollar holds firm

By Wayne Cole

SYDNEY (Reuters) - Asian stocks drifted higher on Monday in sluggish trade as investors chose discretion over valour ahead of central bank meetings in Europe and the always-critical U.S. payrolls report.

MSCI's broadest index of Asia-Pacific shares outside Japan was just a shade firmer at 479.92.

Japanese markets were closed for a holiday.

Modest gains in Hong Kong and Australia were countered by losses in South Korea. Australian shares edged up 0.1 percent as another domestic bank reported record profits.

"We are bullish going into next year, but it wouldn't surprise to see some sort of breather ... We think any pullback is going to be very shallow," said Martin Lakos, division director at Macquarie Bank, of the Australian market.

Major currencies were likewise quiet with the dollar still well supported in the wake of upbeat U.S. manufacturing data that stirred speculation the Federal Reserve might scale back its bond-buying in December, rather than in March as many in the market currently anticipate.

There are no less than four Fed officials speaking on Monday, starting with Fed Bank of Dallas President Richard Fisher in Sydney. Fed Governor Jerome Powell and the heads of the St. Louis and Boston Feds all appear later in the day.

The dollar index was holding firm at 80.691 having climbed to a six-week peak on Friday. It was also up on the yen at 98.76 and threatening a major chart target at 99.00.

The dollar fared best against the euro which was undermined by speculation the European Central Bank (ECB) would have to ease again given disappointing news on unemployment and a startlingly low reading of inflation.

The common currency was pinned at $1.3494 on Monday, well below its recent high of $1.3832. The ECB holds a policy meeting on Thursday and it will be under intense pressure to stimulate the economy.

"We expect the opening statement, and Q&A, to have a distinctly dovish tone," wrote analysts at RBC Capital Markets in a note to clients.

"For now, we think that the Governing Council will refrain from any immediate action, but we expect the downbeat tone of next week's meeting to lay the groundwork for a policy response over the next few months."

The Bank of England holds it policy meeting on Thursday and is expected to stay on hold following a run of improving economic data recently.

A bigger event for markets will be Friday's U.S. payrolls report which is expected to show a modest rise of just 125,000 in October, amid some uncertainty about the impact of the government shut down.

A soft report, and particularly any rise in the jobless rate, would lean against the Fed tapering in December.

Also of note will be the U.S. gross domestic product (GDP) due on Thursday, expected to show annualised growth of 1.9 percent in the third quarter, down from 2.5 percent the previous quarter.

All the talk of Fed tapering saw U.S. Treasury yields rise for a third straight session on Friday. Yields on the benchmark 10-year U.S. Treasury note jumped to 2.63 percent, leaving behind the week's low of 2.47 percent.

Cash Treasuries were not trading in Asia on Monday due to the Japanese holiday, but Treasury futures were 2 ticks lower.

In commodity markets, prices were held back by the bounce in the U.S. dollar. Spot gold was trading at $1,315.06 an ounce, having crumbled from a peak of $1,361.60 last week. Copper was a touch firmer at $7,251 a tonne.

Oil prices steadied following last week's losses as a firmer dollar and ample supplies outweighed concerns about a drop in Libyan crude exports.

Brent crude for December delivery was up 16 cents at $106.01 a barrel. U.S. oil for December delivery added 8 cents to $94.69.

(Additional reporting by Thuy Ong in Sydney; Editing by Eric Meijer)

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Rupee weakens tracking broad dollar rally; share gains limit fall

By Swati Bhat

MUMBAI (Reuters) - The rupee dropped to a three-week low on Friday while also posting its biggest weekly fall in two months as a sharp sell-off in the euro and broad rally in the greenback hurt amid the absence of any fresh domestic triggers.

The euro fell to a two-week low against the dollar on Friday, extending losses into a fifth straight session as slowing euro zone inflation bolstered expectations of looser monetary policy from the European Central Bank.

The rupee which has been relatively stable over the last couple of months after having seen as much as 20 percent fall to a record low in late August has been boosted mainly by robust foreign fund inflows into the stock market. Foreign funds have bought $16.5 billion worth of shares so far this year.

The BSE Sensex surged to a record high as blue chips rallied on the back of strong foreign buying.

"The huge fall in the euro and a rally in the dollar index have pushed the rupee down today, but 62 is a psychological level which will be a key," said Paresh Nayar, head of foreign exchange and debt trading at First Bank Bank.

"The 61.20 support should hold for next week as well, but the overall range could be wider," he added.

The partially convertible rupee closed at 61.74/75 per dollar compared with 61.50/51 on Thursday. Financial markets will remain closed on Monday for a local holiday.

On the week, the rupee fell 0.5 percent, its biggest weekly fall since the last week of August.

The index of the dollar against six major currencies was up 0.4 percent.

Traders will monitor developments on the global front for near-term cues as there is no data or event due on the domestic front.

In the offshore non-deliverable forwards, the one-month contract was at 61.36, while the three-month was at 63.38.

(Editing by Anand Basu)

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Gold hits 2-week low on strong dollar, down for week

By Clara Denina

LONDON (Reuters) - Gold fell to a two-week low on Friday and headed for a weekly drop as upbeat U.S. economic data lifted the dollar, raising anxiety over the Federal Reserve's future course.

The metal was headed for a 2.8 percent weekly drop, after climbing for two consecutive weeks, as expectations the U.S. Federal Reserve will maintain its economic stimulus seemed to have been factored in.

Spot gold was down 0.7 percent to $1,313.96 an ounce by 1244 GMT, extending Thursday's 1.4 percent slide. It earlier fell to the lowest level since October 22 at $1,311.50.

Comex gold futures for December fell $10.30 to $1,313.20 an ounce.

The euro plunged against the dollar after a sharp slowing in euro zone inflation left markets suddenly considering the outside chance of a cut in interest rates soon by the European Central Bank.

The dollar rose to two-week highs against a basket of currencies, in part due to a statement by the Federal Open Market Committee that was not as dovish on the timing of curbing stimulus as investors had expected

"The weakness we have been seeing in gold in the past two days is due to the after-effects of the FOMC statement and also the extremely low inflation rate in the euro zone," Commerzbank analyst Daniel Briesemann said.

"These factors are very supportive of the dollar, which in turn weighed on precious metals prices."

The dollar also got a boost from U.S. data showing the pace of business activity in the Midwest region had risen more than expected in October and weekly jobless claims declined, soothing some worries about sluggish fourth-quarter growth.

A stronger U.S. currency makes dollar-denominated assets such as gold more expensive for foreign investors.

FED FOCUS

Market focus remains heavily on U.S. monetary policy and how soon the Fed will begin tapering its $85 billion a month support programme.

Later on Friday, investors will closely monitor the U.S. ISM survey of manufacturing for October.

Prices had gained 8 percent, since hitting a three-month low in mid-October, after soft U.S. data last month and Washington's budget gridlock led investors to bet the Fed would postpone the tapering of its bullion-friendly stimulus measures.

As a gauge of investor sentiment, New York's SPDR Gold Trust, the biggest gold-backed ETF, reported an outflow of 34 tonnes in October, its biggest monthly drop since July. That brings its outflows for the year to 479 tonnes, or more than $20 billion this year. Holdings of the fund are near four-year lows of 872 tonnes.

Spot silver was unchanged at $21.85 an ounce after falling to its lowest since October 17 at $21.66 earlier in the day. It had fallen 3.5 percent on Thursday, its biggest one-day loss in a month.

The biggest silver ETF, the iShares Silver Trust, also recorded a monthly outflow of 127.4 tonnes in October, its first since June.

Spot platinum was up 0.2 percent at $1,451.74 an ounce, gaining modest support from news that 7,000 members of South Africa's National Union of Mineworkers will down tools at Northam Platinum on Sunday night in a strike over wages.

Spot palladium fell 0.4 percent at $732.00 an ounce.

(Additional reporting by A. Ananthalakshmi in Singapore; editing by James Jukwey and Jane Baird)

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Gold drops over 1 pct on book squaring, dollar rise

By Frank Tang and Clara Denina

NEW YORK/LONDON (Reuters) - Gold and other precious metals fell on Thursday, pressured as commodity funds sold to square books at the end of October, and as investors kept selling after the Federal Reserve's latest policy outlook offered few surprises.

A sharp rise in the dollar index also pressured commodities after data showed business activity in the U.S. Midwest surged past expectations in October, countering recent evidence of soft economic growth.

Comex gold options floor trader Jonathan Jossen said many commodity funds close out core positions and make funds available for year-end taxes on Oct 31, the last day of the fiscal year for such funds.

"It's a very benign equity move today, and here gold is down sharply," Jossen said. The S&P 500 equities index was little changed on Thursday.

Spot gold was down 1.4 percent at $1,322.90 an ounce by 1:19 p.m. EDT (1719 GMT). During the session, gold hit a one-week low at $1,318.79.

For the month, gold was down just 0.2 percent, with the decline limited by economic uncertainty over a partial U.S. government shutdown and a crisis to raise the debt ceiling.

U.S. gold futures for December delivery were down $26.30 at $1,323 an ounce.

On Wednesday, gold fell after the Fed did not sound quite as alarmed about the economy after its last policy meeting as some had anticipated. The U.S. central bank kept its $85 billion-a-month stimulus plan intact.

Silver underperformed to fall 3.5 percent at $21.85 an ounce, putting it on track for its biggest one-day loss in more than a month.

CHINA PREMIUMS ERASED

Bullion was also undermined by slow physical buying in Asia, especially China.

Premiums of physical gold bars on the Shanghai Gold Exchange have largely faded due to fears of a cash crunch, dealers said.

Data showed that China in September bought more than 100 tonnes of gold from Hong Kong for a fifth straight as demand for bullion bars and jewellery was strong.

Spot platinum was down 1.8 percent at $1,444 an ounce, while spot palladium fell 1.2 percent to $733.97 an ounce.

Prices at 1:19 p.m. EDT (1719 GMT)

(Additional reporting by Jan Harvey in London; Editing by Jason Neely, James Jukwey and David Gregorio)

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Gold near two-week lows on stronger dollar, U.S. data

SINGAPORE (Reuters) - Gold was trading close its lowest in nearly two weeks on Friday, hurt by sharp losses in the previous session from month-end profit taking, strong U.S. economic data and a higher dollar.

The metal is headed for a 2 percent weekly drop - its first in three weeks - as bullish sentiment from expectations that the Federal Reserve will keep its stimulus dissipated.

FUNDAMENTALS

* Spot gold edged up 0.1 percent to $1,324.62 an ounce by 0026 GMT, after Thursday's 1.4 percent slide.

* The pace of business activity in the U.S. Midwest jumped in October, exceeding expectations and U.S. jobless claims declined last week in welcome news for the nation's battered labour market after the impact of a government shutdown on furloughed federal workers diminished.

* Markets fear an improving economy could prompt the U.S. central bank to cut back bullion-friendly stimulus measures.

* China bought more than 100 tonnes of gold from Hong Kong for a fifth straight month in September as demand for bullion bars and jewellery stayed strong, keeping it on track to overtake India as the world's biggest gold consumer this year.

* Barrick Gold Corp said it would stop development of its Pascua-Lama mine in South America indefinitely, a surprise reversal on a project that has already cost the world's largest gold producer more than $5 billion.

* India's bullion industry is shrinking, squeezed by government rules meant to curb a surge in gold imports, with banks and others opting to redeploy personnel for now but possibly facing big job cuts in coming months.

* The volume of gold transferred between accounts held by bullion clearers fell 16.3 percent in September to an average 18.5 million ounces a day, its lowest since August 2012, the London Bullion Market Association said.

* South Africa's AMCU union declared a wage dispute on Thursday with platinum producer Lonmin . The union also said its members in the gold sector were voting on whether or not to strike over wages and could do so from next week.

MARKET NEWS

* Asian shares edged down and the dollar inched higher in early trade on Friday after upbeat U.S. economic data prompted some investors to price in a less dovish policy outlook for the U.S. Federal Reserve.

(Reporting by A. Ananthalakshmi; Editing by Richard Pullin)

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Asian shares sag, dollar up after upbeat U.S. data

By Lisa Twaronite

TOKYO (Reuters) - Asian shares struggled on Friday, while the dollar pushed higher after upbeat U.S. data added to uncertainty over when the Federal Reserve will begin tapering its massive stimulus programme.

Reassuring signals on China's factory activity capped losses for equities, however.

China's manufacturing sector grew at the fastest pace in 18 months in October, with the official Purchasing Managers' Index (PMI) rising to 51.4 last month from September's 51.1, beating economists' consensus forecast of 51.2.

A separate private report, the final HSBC/Markit PMI, came in at 50.9, up from 50.2 in September and unchanged from a preliminary flash estimate released last week.

"China is on track for a gradual growth recovery," said Hongbin Qu, HSBC's chief economist for China, in a statement accompanying the PMI.

MSCI's broadest index of Asia-Pacific shares outside Japan fell 0.2 percent, while Japan's Nikkei stock average extended losses in the afternoon session, dropping 1.2 percent.

U.S. S&P E-mini futures edged up slightly, after the S&P 500 Index closed down about 0.4 percent but still gained 4.5 percent for the month.

Later on Friday, the U.S. ISM survey of manufacturing for October could offer investors a fresh signal on the Fed's future course.

"If the ISM report is better than expected, it could add to revived tapering expectations, and U.S. yields and the dollar could go up and stocks could go down," said Masashi Murata, senior currency strategist at Brown Brothers Harriman in Tokyo.

Data on Thursday showed the pace of business activity in the U.S. Midwest jumped more than expected in October, soothing some worries about sluggish fourth-quarter growth after last month's federal government shutdown.

A decline in new jobless claims in the latest week also added to evidence that the economy weathered the shutdown. New claims fell by 10,000 to 340,000, just above the average estimate of 339,000.

Still, not all investors or economists were convinced that the latest U.S. data heralded a shift in monetary policy expectations.

"The existence of noise in the October data will likely make it difficult for the Fed to gather enough evidence to start tapering in December," strategists at Barclays wrote in a note to clients, adding that they still to expect the central bank to begin reducing its current $85 billion monthly bond purchases in March 2014.

PRESSURE ON EURO

The euro remained under pressure after plunging in the previous session as euro-zone inflation dropped to its lowest rate in nearly four years, heightening expectations that the European Central Bank will further ease its monetary policy.

The euro dropped about 0.2 percent to $1.3557, moving away from a two-year peak of $1.3833 set one week ago. On Thursday, it suffered its biggest one-day fall against the greenback in six months, tumbling 1.1 percent.

Data on Thursday showed euro-area inflation slowed to a four-year low of 0.7 percent last month, far below the ECB's target of just under 2 percent. Other data showed unemployment held at record highs in September.

The dollar index <.dxy>, which measures the greenback against six major currencies, was on track for a sixth session of gains, rising about 0.1 percent to 80.296 after touching a two-week peak of 80.418 and pulling further away from a nine-month trough of 78.998 hit one week ago.

Against the Japanese currency, the dollar was about 0.4 percent lower on the day at 97.94 yen.

In commodities trading, gold steadied but was still trading close to its lowest in nearly two weeks, hurt by sharp losses in the previous session from month-end profit-taking, the strong U.S. economic data and the higher dollar.

Spot gold edged up 0.1 percent to $1,324.86 an ounce, after sliding 1.4 percent on Thursday.

Copper got a lift from the China data, rising 0.1 percent to $7,256 a tonne, moving back toward a one-week peak of $7,300 hit on Thursday.

Brent crude for December was slightly up at $109.05 a barrel, while U.S. crude also edged up to $96.46.

(Additional reporting by Natalie Thomas in Beijing; Editing by Eric Meijer & Kim Coghill)

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Rupee weakens on dollar short-covering; gains for second month

By Swati Bhat

MUMBAI (Reuters) - The rupee weakened on Thursday, hurt by dollar short-covering in later trade, but the local currency posted its second straight monthly gain on the back of continued buying of local shares by foreign institutional investors.

The Sensex rose on Thursday to mark a record closing high as state-run lenders such as State Bank of India rallied on hopes of stabilising asset quality and attractive valuations.

Overseas investors bought shares for a 19th consecutive session on Wednesday, taking their total buying to nearly $2.61 billion during that period and to $16.2 billion so far in 2013.

The partially convertible rupee closed at 61.50/51 per dollar compared with its close of 61.235/245 on Wednesday. On the month, the unit gained 1.8 percent, after having surged 5 percent in September.

Traders said the rupee dropped in late trade on the back of short-covering ahead of the upcoming long weekend. Markets in India will be closed on Monday for a holiday.

"Market participants are mostly in a holiday mood so volumes have been low. A 61.25 to 61.85 range should hold for Friday," said A. Ajith Kumar, a senior foreign exchange dealer with Federal Bank.

The dollar hovered near a two-week high on Thursday as some investors cut negative bets on the currency after the U.S. Federal Reserve kept its stimulus programme in place and its options for tapering its bond buying open.

The fiscal deficit data released earlier in the day was largely in line and failed to have much impact, dealers said.

India's fiscal deficit was 4.12 trillion rupees during April-September, or 76 percent of the full-year target, government data showed on Thursday.

In the offshore non-deliverable forwards, the one-month contract was at 61.93, while the three-month was at 62.91.

(Editing by Prateek Chatterjee)

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Euro tumbles, dollar up on central bank views

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Gold eases on stronger dollar after Fed statement

By Clara Denina

LONDON (Reuters) - Gold slipped to one-week lows on Thursday as the dollar gained after the U.S. Federal Reserve's latest policy outlook was deemed less dovish than some had wagered on.

The metal had gained ground over the past two weeks, hitting a five-week high on Tuesday in anticipation of the Fed's decision.

But it fell after the U.S. central bank did not sound quite as alarmed about the state of the economy as some had anticipated, although it kept its $85 billion-a-month stimulus plan intact.

"The market was expecting that in light of the government shutdown and weaker data there was going to be a supportive statement, perhaps more dovish than it has been in recent months, but it didn't move in that direction," Macquarie analyst Matthew Turner said.

Spot gold was down 0.5 percent at $1,335.36 an ounce by 1102 GMT, after falling to its lowest since October 24 at $1,330.16.

Comex gold futures slipped 1 percent to a one-week low of $1,330, while silver dropped nearly 3 percent.

The dollar hovered near a two-week high and U.S. Treasury yields stood above 2.5 percent.

Gold prices have fallen nearly 20 percent this year in the expectation of an imminent scaling back of monetary stimulus by the Fed, but a budget battle in Washington and a string of weak economic data had raised questions over whether it would begin that process this year, giving bullion a boost.

"With this event risk now behind us, the market will go back into data-watch mode," said ANZ analyst Victor Thianpiriya. "For gold, the intraday moves will continue to be driven by gyrations in the U.S. dollar."

The market will monitor U.S. weekly jobless claims at 1230 GMT and Chicago PMI numbers for October at 1345 GMT.

Bullion was also undermined by slow physical buying in Asia, especially China.

Prices on the Shanghai Gold Exchange have trended lower than global prices due to fears of a cash crunch.

Net purchases by the Chinese from Hong Kong, however, totalled 110.914 tonnes in September, compared with 110.505 tonnes in August, according to data from the Hong Kong Census and Statistics Department.

Spot silver was down 1.3 percent to $22.32 an ounce, well below its highest since September 20 at $23.06 hit in the previous session.

Spot platinum fell 0.8 percent at $1,458.90 an ounce. Spot palladium lost 0.3 percent at $740.72 an ounce.

(Additional reporting by A. Ananthalakshmi in Singapore; editing by Jason Neely)

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Gold falls on dollar rise, awaits Fed statement

By Frank Tang and Clara Denina

NEW YORK/LONDON (Reuters) - Gold fell on Tuesday, retreating from the previous session's five-week high, as a dollar rise and encouraging U.S. consumer spending data prompted investors to take profits ahead of a policy decision by the U.S. Federal Reserve.

Bullion prices slipped after a gauge of U.S. consumer spending rose in September, but falling car sales pointed to sluggish economic growth.

The Fed began a two-day policy meeting in which it is widely expected to confirm it will continue buying bonds at the rate of $85 billion a month in a policy statement on Wednesday.

"Investors are keen to see what the Fed will say with regard to the softening seen in some of the recent U.S macro data and whether this will impact the central bank's tapering timeline," said Edward Meir, metals analyst at futures brokerage INTL FCStone.

Many economists say the Fed could push tapering to March next year.

Spot gold was down 0.5 percent to $1,344.89 an ounce by 2:40 p.m. EDT (1840 GMT).

It hit its highest since September 20 at $1,361.60 on Monday, as disappointing U.S. manufacturing and pending home sales data reinforced the view the economy is not yet strong enough for the Fed to start tapering stimulus.

U.S. gold futures for December delivery settled down $6.70 an ounce at $1,345.50, with volume about 15 percent below its 30-day average, preliminary Reuters data showed.

Gold prices have fallen nearly 20 percent this year in the expectation of imminent tapering by the Fed.

The metal has gained 8 percent over the past two weeks, as a budget battle in Washington and a string of weak economic data have raised questions over whether it will scale back monetary stimulus, giving bullion a boost.

ASIAN DEMAND WEAK

Physical demand could take a hit on signs of slower buying by Asian investors and jewelers.

Chinese gold prices closed lower than global prices on Tuesday for the first time this year, traders said, as fears of a credit tightening prompted investors to sell bullion for cash.

As a gauge of investor interest, holdings of the world's largest gold-backed exchange-traded fund, SPDR Gold Shares, remained unchanged at 872.02 tonnes on Monday after falling 4.5 tonnes on Friday.

Among other precious metals, silver eased 10 cents to $22.46 an ounce. Platinum was down 1.1 percent to $1,454.50 an ounce, while palladium eased 0.1 percent to $742.72.

(Additional reporting by A. Ananthalakshmi in Singapore; Editing by James Jukwey and Marguerita Choy)

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S&P leads stocks ahead of Fed meeting, dollar jumps

By Rodrigo Campos

NEW YORK (Reuters) - The S&P 500 hit a record on Tuesday to lead global equities higher ahead of a Federal Reserve meeting on the future of the U.S. stimulus program, while the euro hit a one-week low.

The U.S. dollar climbed the most in almost two months against a basket of currencies as the euro, which earlier brushed against last week's two-year high versus the greenback, reversed course.

Wall Street stocks advanced, with the S&P 500 at yet another intraday record high on continued expectations the U.S. Federal Reserve will keep its $85 billion monthly bond purchases intact for several months.

Markets were thrown for a loop in mid-September, when the expectation was high for the Fed to start trimming its monthly purchases. Although many are wary of surprises when the Fed publishes a statement after its two-day meeting concludes on Wednesday, most see the recent rally in riskier assets and a dollar selloff as largely factoring in the decision.

"The Fed surprised me by not tapering in September and the key reason they cited was the fact inflation is running very moderately, and they still have lots of room on the inflation front," said Doug Foreman, co-chief investment officer at Kayne Anderson Rudnick Investment Management in Los Angeles.

"Certainly the data today didn't give them anything different to think about that."

U.S. producer prices unexpectedly fell in September and the increase in the annual rate was the smallest in nearly four years.

The Dow Jones industrial average rose 87.64 points, or 0.56 percent, at 15,656.57. The Standard & Poor's 500 Index was up 6.72 points, or 0.38 percent, at 1,768.83. The Nasdaq Composite Index was up 3.59 points, or 0.09 percent, at 3,943.72.

MSCI's world equity index edged up 0.1 percent, trading within last week's range.

In Europe, shares edged higher as results at BP and Saipem fueled a surge in the oil sector, a laggard in this year's equity rally. The FTSEurofirst 300 index closed up 0.4 percent.

EURO DIVES

The euro hit a one week low against the dollar at $1.3735 but was still close to a two-year high hit last week. The single currency had hit $1.3813 earlier after the European Central Bank's Ewald Nowotny said he does not see any tool the ECB could use against a strong euro.

The dollar gained 0.5 percent against a basket of currencies in its largest percentage gain since early September.

U.S. Treasuries prices were flat, with yields close to three-month lows. The light trading volume suggested traders were reluctant to make big bets ahead of the Fed meeting and as the Treasury Department sought to sell $96 billion in coupon-bearing debt this week.

"The market is directionless. There is no urgency to push yields higher or lower," said Lou Brien, market strategist at DRW Trading in Chicago.

Benchmark 10-year Treasury notes were unchanged, the yield at 2.5106 percent.

Spot gold, which earlier rose more than 8 percent from a three-month low in mid-October, fell 0.5 percent to around $1,345 an ounce, pressured further by the dollar strength.

Brent crude fell 1 percent to $108.52 a barrel, though traders said this was a consolidation after a 2.5 percent gain the previous day, when reports of a sharp drop in Libyan oil exports rekindled worries over global supply. U.S. crude was off 0.6 percent at $98.05.

Libya's crude oil exports have dropped to less than 10 percent of capacity as the government has struggled to reach a deal with protesters blocking its big eastern facilities, with some demanding a greater share of the oil wealth.

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Euro drops from near 2-year high vs. dollar; Wall St up on earnings

By Angela Moon

NEW YORK (Reuters) - The euro dropped from a near two year-high against the dollar on Friday, pressured by a survey showing an unexpected fall in German business morale, while world shares hovered near five-year highs as Wall Street extended yet another day of gains.

The euro's decline was not dramatic, however. It stayed not far from a near two-year high touched earlier against a weak dollar.

Soft U.S. jobs and other data this week have bolstered the view that the Federal Reserve will not tamper with its huge bond-buying program until well into next year, triggering a drop in the dollar and lifting both shares and bonds.

There was an interruption on Friday, though, as a surprise dip in Germany's Ifo business index and soft euro zone lending data sent another reminder of the bloc's fragility a day after a disappointing PMI reading.

But many analysts say the euro can rise towards $1.40 as investors seek alternatives to a dollar hobbled by expectations the Federal Reserve will maintain its monetary stimulus.

"Traders continue to make the euro their favorite anti-dollar trade in light of expectations the Fed will continue its QE (quantitative easing) program well into the start of next year," said Boris Schlossberg, managing director of FX strategy at BK Asset Management in New York.

While equity markets in Asia and Europe fell, Wall Street started off on a higher note, setting the S&P 500 on track for a third consecutive week of gains.

Better-than-expected earnings from big tech companies on Thursday - Amazon Inc , Microsoft , and Zynga Inc - boosted investor confidence in an earnings season which has been slightly disappointing with the exception of Google Inc . Next week's earnings spotlight will be on tech companies like Apple Inc and Facebook Inc .

In Europe, worries about tighter cash markets in China and the impact of the strong euro on corporate earnings weighed on equity markets despite an acceleration in British third quarter GDP. The FTSEurofirst300 was down 0.1 percent.

MSCI's world share index, which tracks 45 countries, was down 0.1 percent but still near a five-year high.

On Wall Street, the Dow Jones industrial average was up 35.83 points, or 0.23 percent, at 15,544.37. The Standard & Poor's 500 Index was up 3.96 points, or 0.23 percent, at 1,756.03. The Nasdaq Composite Index was up 25.61 points, or 0.65 percent, at 3,954.57.

The euro fell 0.1 percent to $1.3795, below an earlier high of $1.3833, its strongest since November 2011.

The dollar edged up 0.1 percent against a currency basket to 79.252, off an earlier near nine-month low of 78.998.

After a choppy week for commodities markets, Brent crude slipped further below $107 a barrel on Friday on concern about higher supply and faltering demand. Brent crude for December was down 20 cents a barrel to $106.79, falling for a third day. U.S. crude oil was up 16 cents at $97.27, although still down around 3.5 percent on the week, its biggest weekly loss since June.

Gold eased on Friday as the dollar edged off its lows, but was still set for a second week of gains on the view that sluggish U.S. data would persuade the Fed to keep stimulus intact until well into 2014.

Spot gold fell 0.6 percent to $1,338.05 an ounce, but was still not too far from its highest level since September 20 of $1,351.61 hit on Thursday.

"We are certainly seeing some support this week, which is mainly due to external factors like the weakness of the dollar and dropping yields as the market tries to assess whether we will have tapering in coming months or not," said Credit Suisse analyst Karim Cherif.

U.S. Treasuries prices edged up on Friday as investors waited on new signs about the strength of the economy, which is key to the timing of when the Federal Reserve is likely to reduce the size of its bond purchase program.

Treasuries have been largely rangebound since Tuesday, when yields fell on data that showed employers hired fewer workers than expected in September, stoking fears the economy was slowing even before the government's 16-day shutdown.

The Fed is viewed as unlikely to change it purchase program from $85 billion a month when it holds its policy meeting next week, with most seeing the central bank likely to maintain the same rate of purchases until next March.

Benchmark 10-year notes were last up 2/32 in price to yield 2.51 percent. The yields have fallen from 3.00 percent on September 5, before the Fed surprised investors by leaving its bond purchase program unchanged.

(Reporting by Angela Moon; Editing by Nick Zieminski)

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Asian stock markets fall, dollar near two-year low vs euro

By Dominic Lau and Vidya Ranganathan

TOKYO (Reuters) - A stronger yen depressed Japanese stocks on Friday, while the dollar was hemmed in near a two-year low against the euro by expectations the U.S. Federal Reserve will continue its monetary stimulus well into 2014.

Those expectations were tempered, however, by continued worries over tighter cash markets in China, leading to a lopsided and selective rally in Asian markets.

The Nikkei share average's 2 percent drop was also set to pressure European markets on Friday, financial bookmakers predicted.

Financial spreadbetters were forecasting falls in Germany and France as the region's equity indexes pause for breath after hitting fresh highs this week. They expected Britain's FTSE 100 to open almost unchanged but Germany's DAX was seen opening down by as much as 0.3 percent while France's CAC 40 was seen falling 0.4 percent.

In Asia, the Indonesian rupiah rallied nearly 2 percent against the weak dollar, but the Aussie was on the back foot. Aussie shares rose 0.3 percent, ending near the 5-year high of 5,402.4 hit earlier in the week.

Meanwhile, South Korean stock markets fell as investors braced for some profit-taking in a market that has seen record foreign buying for 40 consecutive sessions and has pushed the won to a two-year high this week.

The KOSPI index was down 0.8 percent even after Samsung Electronics Co Ltd, the index's largest component, said its quarterly operating profit surged 26 percent to a new record.

"A combination of foreign outflows and shadows of China liquidity concerns are dragging on the market," said Lee Kyung-soo, an analyst at Shinyoung Securities.

MSCI's broadest index of Asia-Pacific shares outside Japan eased 0.35 percent, reversing earlier slight gains. The index fell 0.1 percent on Thursday as rising Chinese money market rates countered signs of a pick-up in manufacturing.

Shanghai shares hit their lowest levels in a month, while Tokyo's stock market was set to suffer its first weekly drop in three weeks.

Although the Japanese quarterly earnings season is still at an early stage, 70 percent of the 10 Nikkei companies that have reported so far have missed market expectations, according to Thomson Reuters StarMine. That compared with 42 percent in the previous quarter.

U.S. S&P E-mini futures were flat in early trade. The S&P 500 index had advanced 0.3 percent on solid earnings and expectations that monetary stimulus will be in place for the foreseeable future after weak data.

U.S. manufacturing output fell for the first time in four years and the number of new claims for unemployment benefits fell less than expected last week.

DOLLAR WEAKNESS

The euro was up 0.1 percent $1.3815, not far from a two-year high of $1.3826 touched on Thursday and shrugging off data showing the pace of growth in euro zone business unexpectedly eased this month.

"The dollar will not rally without Fed tapering expectations rising again, but we would not chase EUR/USD higher here, as rate compression suggests the pair is unlikely to break much higher," Societe Generale analysts wrote in a note, saying they favoured Scandinavian and Antipodean currencies into year-end.

"Fed tapering expectations being pushed out into 2014 and further ECB easing early next year suggest a favourable policy environment for the FX carry trade. Throw in lower volatility and seasonality effects, and one has the perfect cocktail for the carry trade."

Yet the Antipodeans, the Aussie and New Zealand dollars, were nursing broad losses too as investors quit extended long positions in the two currencies.

The Aussie was settling around $0.9605, after touching a low of $0.9582. It had hit a 4-1/2-month peak of $0.9758 on Wednesday, but is on track for a loss of close to 1 percent for the week.

The kiwi was holding just above a 10-day low at $0.8310. It had also peaked during the week at a multi-month high, but now faces a weekly loss of more than 2 percent.

Against the yen, the dollar stood at 97.09, a shade off the two-week low of 97.15 yen hit on Wednesday.

The dollar index, which tracks a basket of major currencies, was little changed.

Gold paused for breath after climbing 1.1 percent on Thursday, while U.S. crude prices added 0.3 percent to about $97.35 a barrel, moving away from a 3-1/2 month low of $95.95 touched in the previous session.

(Additional reporting by Gyles Beckford in Wellington and Jungmin Jang in Seoul; Editing by Kim Coghill and Eric Meijer)

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China worries, European banks, earnings pressure world stocks; dollar, yen up

By Angela Moon

NEW YORK (Reuters) - Global equity markets fell on Wednesday on mixed corporate results and concerns that new scrutiny of euro zone banks could prove costly for its weaker members, while the U.S. dollar and the Japanese yen held small gains sparked by worries over Chinese monetary policy.

The dollar edged up from near two-year lows against the euro and an 8-1/2-month trough versus a major currency basket as investors sought the greenback's safety following a spike in China's short-term money market interest rates.

The yen was also in demand, with the dollar down 0.7 percent at 97.40 yen and the euro 0.9 percent weaker at 134.09 yen.

Wall Street opened lower following four straight days of record highs for the S&P 500. Mixed results from major U.S. companies, including equipment maker Caterpillar Inc, which sank nearly 6 percent in early trade, pulled stocks lower.

"With Caterpillar cutting its outlook for the year and concerns over China slowing against a backdrop of a market at a record, some people just decided to ring the cash register and take some profits," said Eric Kuby, chief investment officer at North Star Investment Management Corp in Chicago.

He said the selling was "orderly" and indicates more a pause than nervousness on the part of investors.

European stocks recorded their sharpest falls in two weeks as the details of a new, year-long test of euro zone lenders by the bloc's central bank amplified anxiety about China and the recent rapid run-up in world equity markets.

The ECB wants to unearth any risks hidden in the banking system before supervision comes under its roof as part of a three-pronged "banking union" plan designed to avoid a repeat of the euro zone debt crisis.

The pan-European FTSEurofirst 300 fell 0.7 as Italian, Spanish and Portuguese markets, as well as banking stocks, all dropped.

Jan von Gerich, chief developed market strategist for Nordea, said that if done properly, the review should help the euro zone, but in the short term it could revive questions about its weaker members if public money is needed for bank repairs.

"The most interesting part will be what it says about Italy. Its banks haven't gone through the same kind of scrutiny as the ones in Spain or those in Greece, Ireland or Portugal - the smaller countries, too, whether Slovenia will need a bailout for example," he added.

MSCI's world equity index, which tracks shares in 45 countries, fell 0.7 percent.

On Wall Street, the Dow Jones industrial average was down 86.51 points, or 0.56 percent, at 15,381.15. The Standard & Poor's 500 Index was down 13.43 points, or 0.77 percent, at 1,741.24. The Nasdaq Composite Index was down 39.68 points, or 1.01 percent, at 3,889.88.

CHINESE WHISPERS

Concerns about soft U.S. jobs data for September, which appeared to rule out a cut in U.S monetary stimulus before next year and caused a plunge in the dollar, took a back seat as Chinese money market rates climbed to levels not seen since July. The People's Bank of China failed for a second day to inject cash.

Rising liquidity needs for Chinese corporate tax payment deadlines and worries about bad banking debt appeared partly responsible for the jump in short-term rates, analysts said.

The rate spike was short-lived but caused a market panic nevertheless, causing a scramble for safe-haven dollars and yen.

"The weight of a weak U.S. non-farm (payroll data released on Tuesday) is surpassed by rising risk aversion on concerns over China's money market. Profit-taking takes hold," said Camilla Sutton, chief currency strategist at Scotiabank in Toronto.

U.S. Treasuries yields fell to the lowest in three months after Tuesday's weaker-than-expected jobs data reinforced expectations that the Federal Reserve is unlikely to reduce the size of its bond purchase program in the near term.

Buying overnight helped yields fall further, with no large data releases scheduled on Wednesday. Benchmark 10-year Treasuries were up 8/32, the yield at 2.4836 percent.

In commodities trading, U.S. crude fell below $97 a barrel to its lowest since July, outpacing a smaller drop in Brent futures, pressured by ample supplies and expectations of a further inventory buildup in the United States, the world's top consumer.

U.S. crude fell $1.88 to $96.42 after earlier reaching $96.32, its lowest since July 1. Brent crude fell $1.39 to $108.58 a barrel after hitting a session high of $110.06.

(Additional reporting by Rodrigo Campos, Karen Brettell and Gertrude Chavez-Dreyfuss in New York and Alex Lawler in London; Editing by Dan Grebler)

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Chinese tensions hit world shares, dollar tentative

By Marc Jones

LONDON (Reuters) - Concerns over tighter Chinese monetary policy hit global shares still high on hopes of extended U.S. stimulus on Wednesday, when the dollar tentatively steadied at an eight-month low after its latest slide.

European shares saw their biggest falls in two weeks as markets opened when fears of tighter policy in China were amplified by reports that some of its big banks were tripling write-offs on bad loans.

Asian markets saw widespread weakness as a variety of factors ranging from a strengthening yen in Japan and fading rate cut hopes in Australia added to the negativity.

"What has happened this morning is that we have the Chinese rate surge on the policy tightening fears," said Alvin Tan, a strategist at Societe Generale in London.

"That has basically generated a broad correction in risk assets and in Europe that is continuing."

Short-term Chinese money rates underscored investors' concerns that regulators there are poised to tighten liquidity to quell growing inflationary pressures.

The benchmark seven-day repo contract, which had been steadily sliding since October 9, spiked in the morning session, a day after a policy adviser to the People's Bank of China (PBOC) told Reuters it was weighing tightening measures.

In Europe, A string of earning misses from some of the region's biggest corporate names including chip maker STMicroelectronics and brewer Heineken added to the pressure on shares. <.eu>

Investors were also digesting the first firm details from the European Central Bank on it plans to check the health of euro zone banks over the next year.

The FTSEurofirst 300 <.fteu3> was down as much as 0.7 percent as trading gathered pace, with Italian, Spanish and Portuguese markets leading the way with respective falls of 1.4, 1.2 and 1.3 percent.

ECB BANK CHECK

The ECB's new supervision role is the first leg of a three-pronged plan for a banking union in the euro zone and is designed to ensure there are no holes that could leave the bloc vulnerable.

Jan von Gerich, chief developed market strategist for Nordea, said that while if done properly it should help the euro zone, in the short term it could revive questions about its weaker members.

"The most interesting part will be what it says about Italy. Its banks haven't gone through the same kind of scrutiny as the ones in Spain or those in Greece, Ireland or Portugal... The smaller countries, too, whether Slovenia will need a bailout for example."

In the currency market, focus remained on the prospect of Federal Reserve keeping its stimulus programme running at full after soft jobs data on Tuesday stoked concerns the U.S. was losing momentum even before this month's budget tussle.

Nine of 15 U.S. primary dealers surveyed by Reuters on Tuesday now expect the Fed to begin tapering its $85 billion-a-month bond-buying programme in March.

The dollar had tumbled almost 1 percent against its Japanese counterpart to 97.22 yen by 0830 GMT and was near a two year low versus the euro at $1.3760.

In the near-term, the dollar could see further weakness against other major currencies such as the euro and sterling, said Sim Moh Siong, FX strategist for Bank of Singapore, adding that the euro may rise towards levels around $1.39.

"I think there's certainly a high possibility that dollar weakness might extend a bit further, but I'm not really sure that it changes the medium-term dollar picture," Sim said.

The Australian dollar was last down 0.6 percent against its U.S. counterpart in a whipsaw session that saw it jump about a quarter of a U.S. cent after a stronger than expected inflation reading dampened rate cut hopes.

The yield on benchmark 10-year Treasury notes fell to 2.492 percent, its lowest since late July, after closing U.S. trade at 2.512 percent. German Bunds tracked the move as they hit three-week highs in early trading.

On the commodities front, concerns about a near-term U.S. crude surplus helped push U.S. crude prices down about 0.8 percent to $97.53 a barrel. Brent crude gave up 0.6 percent to $109.29 a barrel, supported by a weaker dollar.

Copper slipped from near one-month highs as traders booked profits after the U.S. jobs report reinforced the metal's weak fundamental outlook, falling 0.8 percent to $7,272.75.

Gold fell 0.3 percent to $1,332.39 an ounce, having risen to a four-week high after the payrolls data.

(Reporting by Marc Jones; editing by Ron Askew)

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Asia shares pare gains, dollar pressured after U.S. jobs data

By Lisa Twaronite

TOKYO (Reuters) - Asian shares pared gains and the dollar plumbed a fresh two-year low against the euro on Wednesday after disappointing U.S. jobs data vanquished any expectations that the Federal Reserve will taper its stimulus before next year.

Japan's Nikkei share average dropped 1 percent as a stronger yen took a heavy toll, but earlier touched a 3-1/2 week high.

Australian shares were slightly higher after hitting five-year peaks, though they pared gains after stronger-than-expected inflation data reduced expectations for another interest rate cut.

MSCI's broadest index of Asia-Pacific shares outside Japan was off its session highs but holding narrowly in positive territory, while profit-taking pushed Seoul shares off their highest level in more than 26 months.

"Slow growth in the U.S. economy is worrisome for global markets in the long term," said IM Investment & Securities analyst Kang Hyun-gee. "But in the near term, extended liquidity will work in favour of equities."

U.S. S&P 500 E-mini futures were slightly down, after the S&P 500 Index closed at a record high in New York on Tuesday.

U.S. nonfarm payrolls increased by 148,000 workers in September, less than expected. While the employment gain in August was revised up, the July figure was revised down to be the weakest since June 2012.

The report suggested the economy was losing momentum even before the U.S. fiscal standoff that partially shut down the government for more than two weeks, lending credence to the central bank's decision to hold off on reducing its stimulus.

"In light of the moderate tone of the September employment report, we have pushed out our expectation for the first Fed tapering in the pace of asset purchases to March 2014 from December 2013," strategists at Barclays wrote in a note to clients.

Nine of 15 U.S. primary dealers surveyed by Reuters on Tuesday expect the Fed to begin tapering its $85 billion-a-month bond-buying programme in March.

DOLLAR UNDER PRESSURE

The dollar tumbled 0.6 percent against its Japanese counterpart to 97.55 yen, with Japanese exporters said to have sold the U.S. unit, triggering stop-loss orders at 97.70 yen.

The euro was at $1.3786, after rising as high as $1.3793 on the EBS trading platform, its strongest since November 2011.

The dollar index last stood at 79.157, after it fell to its weakest in eight months at 79.141 earlier, within sight of its 2013 low of 78.918 touched in February.

The Australian dollar was slightly lower, after jumping about a quarter of a U.S. cent after the CPI report.

The yield on benchmark 10-year Treasury notes edged down to 2.494 percent, its lowest since late July, after closing U.S. trade at 2.512 percent.

On the commodities front, concerns about a near-term U.S. crude surplus helped push U.S. crude prices down about 0.5 percent to $97.86 a barrel.

Copper slipped from near one-month highs as traders booked profits after the U.S. jobs report reinforced the metal's weak fundamental outlook, falling 1.0 percent to $7,260.

Gold inched 0.1 percent lower to $1,338.54 an ounce, having risen to a four-week high after the payrolls data.

(Additional reporting by Jungmin Jang in Seoul; Editing by John Mair & Kim Coghill)

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Dollar eases, shares rise after weak U.S. jobs data

By Herbert Lash

NEW YORK (Reuters) - The dollar slid to a two-year low against the euro and global equity markets rose for a fifth straight session on Tuesday after weak U.S. jobs data reinforced expectations the Federal Reserve will keep its easy-money policy intact into 2014.

The S&P 500 index, a benchmark for U.S. stocks, closed at a record high, while U.S. Treasuries yields fell to the lowest levels in three months on the labor market report.

Nonfarm payrolls increased by 148,000 in September, the Labor Department said in a report delayed by the 16-day shutdown of the federal government. The total was well below economists' estimates of 180,000 new jobs.

Data for August was revised to show more positions created than previously reported, but revisions to the July figures showed employment gains that were the weakest since June 2012.

Economists and market analysts said the tepid pace of U.S. job growth supported the decision by the Fed's policy-setting Federal Open Market Committee in September not to begin to pare its purchases of $85 billion a month in bonds.

The Fed's bond-buying, which aims to bolster the economy by keeping interest rates low, has been a major contributor to the S&P 500's 23 percent gain so far this year.

"Today's underperforming jobs number fully justifies September's cautious FOMC," said Joseph Trevisani, chief market strategist at WorldWideMarkets in Woodcliff Lake, New Jersey.

"Dollar bulls will be discomfited but equities will find the economic logic invigorating."

Stocks rose on Wall Street, in Europe and elsewhere in the Americas after the jobs report. The euro jumped and the dollar index slipped, while government debt prices rose on both sides of the Atlantic, pushing yields lower.

Equities later pared some gains, and the technology-rich Nasdaq composite index briefly slipped into negative territory before recovering.

MSCI's all-country stock index, which tracks stocks in 45 countries, rose 0.67 percent to levels last seen in January 2008. The FTSEurofirst 300 of leading European shares rose 0.54 percent to close at 1,288.06.

On Wall Street, the Dow Jones industrial average ended up 75.46 points, or 0.49 percent, at 15,467.66. The Standard & Poor's 500 Index was up 10.01 points, or 0.57 percent, at 1,754.67. The Nasdaq Composite Index was up 9.52 points, or 0.24 percent, at 3,929.57.

The euro hit a high of $1.3792 against the dollar, its strongest level since November 14, 2011. It was last at $1.3781, up 0.73 percent.

Against the yen, the dollar fell as low as 97.86 yen was last down 0.09 percent at 98.09 yen in choppy trade.

The dollar index, a basket of six major trading currencies, was down 0.57 percent.

"This really does push us into a January, February mode (for Fed tapering), and if there is a shutdown, possibly even further," said Aaron Kohli, an interest rate strategist at BNP Paribas in New York.

The deal reached by Congress last week to end the partial federal shutdown was only a temporary fix, providing funds for the government until January 15 and raising the debt ceiling until February 7, which could lead to another political impasse next year.

Benchmark 10-year notes were last up 26/32 in price to yield 2.5124 percent, the lowest since July 24.

German Bund futures hit two-week highs, closing 63 ticks higher on the day at 140.54, while yields on German 10-year government debt fell below 1.80 percent.

"This report definitely gives the Fed pause. It keeps QE alive and bonds will like it and so might stocks. This is positive for all asset prices," said Craig Dismuke, chief economic strategist with Vining Sparks in Tennessee.

Brent crude oil rose above $110 per barrel, pulling its premium above U.S. light crude to the widest in six months, after news of a deterioration in relations between the United States and key OPEC oil producer Saudi Arabia.

Brent for December rose 33 cents a barrel to settle at $109.97. U.S. crude futures slipped $1.42 to settle at $97.80 a barrel.

U.S. gold for December, the most active gold futures contract on New York's COMEX, rose $26.80, or 2 percent, to settle at $1,342.60 an ounce.

European equities set five-year highs in a broad-based rally spurred by the jobs report and corporate results that beat analysts' estimates.

Norwegian insurer Gjensidige jumped 8 percent on third-quarter earnings that beat forecasts and a surprise special dividend. UK consumer goods firm Reckitt Benckiser Group rose 5.2 percent after reporting higher revenue and saying it was reviewing options for its pharmaceuticals unit.

(Additional reporting by Marc Jones in London; Editing by Dan Grebler and Leslie Adler)

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JP Morgan set for 13-bln dollar fine over `risky` mortgage-backed securities

London, Oct 20 (ANI): US banking giant JP Morgan Chase is reportedly set to pay a whopping 13 billion-dollar fine to the US Department of Justice in order to settle investigations into its mortgage-backed securities.

According to the BBC, the fine, which is said to include nine billion dollars in fines and a further four billion dollars in relief for struggling homeowners, would be the biggest settlement of its kind ever paid by an American company if it is confirmed.

The report mentioned that JP Morgan is alleged to have sold mortgage-backed assets, which were mainly supposed to be risk-free home loans although they contained a mix of investments.

The report further said that the assets are widely thought to have played a central role in the near collapse of the banking system when banks realised in 2007 that many of their assets were worth a fraction of their official book value.

The fine would settle all potential civil action that might be taken against JP Morgan in future, although it does not rule out criminal cases against individuals, the report added.

JP Morgan, which has lost 380 million dollars during the quarter, said that it has set aside a fund of 23 billion dollars to deal with mounting legal costs, the report added. (ANI)

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