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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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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Facebook shares back on roller-coaster, but analysts see value

REUTERS - More than a dozen brokerages increased their price targets on Facebook Inc shares on Thursday.

Investors ignored them.

Facebook's shares fell 3 percent to $47.45 at the opening, resuming the roller-coaster ride they have been on since the No. 1 social network released results on Wednesday.

Facebook's shares soared as much as 15 percent in extended trading on Wednesday before suddenly falling to $47.40, down 3 percent from their $49.10 close.

Most analysts attributed the after-hours turnaround to management comments about slowing usage - particularly by young teenagers - and a statement that the company had no plans to increase the frequency of ads shown to users.

Facebook shares, which have nearly doubled in value this year, breached the $50 mark in heavy premarket trading after a slew of analysts raised their price targets to as much as $65.

Facebook reported better-than-expected results, helped by strong advertising revenue. But Chief Financial Officer David Ebersman later said there had been a decrease in daily users, specifically among younger teens.

Ebersman also said the company would not boost the frequency of ads -- one per 20 stories in the newsfeed -- shown to users.

Facebook's newsfeed ads, which inject paid marketing messages into a user's stream of content, have boosted the company's revenue and its stock price. But the company has had to be careful not to turn off users with too many ads.

Analysts had mixed - but mostly positive - views about the outlook for the company's advertising business.

"We believe managing ad load is important to maintaining the user experience for the long term," said J.P. Morgan analyst Doug Anmuth, who raised his price target on the stock by $9 to $62.

However, Deutsche Bank analysts said they expected mobile ad revenue growth to slow to 75 percent year-on-year in 2014 compared with 80 percent now.

Analysts at BMO Capital Markets, the only brokerage to downgrade the stock, said they were disappointed about a lack of visibility around Facebook's plans for social TV advertising. BMO cut its rating on the stock to "market perform" from "outperform."

Facebook's third-quarter advertising revenue rose 66 percent, with mobile ads making up about half of total ad revenue.

"The well-above trend figure provides confidence that growth can continue at a rapid clip," Pivotal Research Group analyst Brian Wieser said in a note, upgrading the stock to "buy" from "hold."

Some analysts said that while early teenagers were ditching Facebook, some were joining Facebook-owned Instagram. This had put the company in a good position to monetize the mobile photo-sharing app, they said.

"We continue to see two major catalysts in Instagram and video ads, which could be FB's next billion-dollar business," Jefferies & Co analysts said, maintaining their "buy" rating and $60 price target.

Evercore Partners raised its price target to $65 from $60, and maintained its "overweight" rating on the stock.

Among others, UBS raised its price target to $62 from $60, RBC Capital Markets to $60 from $52, Cantor Fitzgerald to $63 from $40, and Stifel Nicolaus to $56 from $50.

Out of 15 brokerages, at least 12 have a "buy" or the equivalent of a "buy" on Facebook's stock.

Facebook shares were down 2.2 percent at $48 in early trading on the Nasdaq.

(Reporting by Saqib Iqbal Ahmed and Soham Chatterjee; Editing by Saumyadeb Chakrabarty and Ted Kerr)

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Global shares, gold creep higher as Fed decision nears

By Richard Hubbard

LONDON (Reuters) - World shares and gold inched higher on Wednesday as investors wagered that the U.S. Federal Reserve would signal plans later in the day to keep its stimulus intact for several more months.

However, after solid rallies across most riskier asset markets in the run-up to the decision, investors were wary of driving prices much higher until they hear what the Fed has to say about future plans for scaling back its stimulus.

"Tapering, while put off right now, will come back quite soon. We think in the first half of next year they are going to reduce that stimulus," said Christian Schulz, senior economist at Berenberg Bank.

A majority of U.S. primary dealers surveyed by Reuters confirmed that the recent government shutdown and standoff over raising the debt ceiling had made it more likely the Fed would delay the timing of its stimulus reduction. The Fed will release a statement at 1800 GMT after a two-day meeting.

The conviction that it would delay any move to end its steady cash injections though was enough to see the MSCI world equity index add 0.2 percent in early European trade to bring it back to a level last seen in January 2009.

Europe's broad FTSE Eurofirst 300 index also reached its highest peak in five years after a gain of 0.3 percent in early trading.

European shares were supported by some solid corporate earnings news from the likes of clothing retailer Next , and after Wall Street's strong finish on Tuesday.

The Dow Jones Industrial Average and S&P 500 set life-time closing highs when a key gauge of consumer sentiment showed confidence tumbled in October, adding to recent evidence of sluggish economic growth.

A report on private sector jobs growth in the United States for October due out later should add further weight to the view that this month's political showdown in Washington has caused a setback in the nascent recovery.

DOLLAR DULL

In the currency market, the dollar touched a one-week high against a basket of major currencies as investors who had been selling the greenback trimmed positions ahead of the announcement.

Dollar sellers had driven the U.S. unit to nine-month lows by the end of last week, taking their lead from steady easing in U.S. Treasury yields. The 10-year T-note stood at around 2.5 percent, down from 3 percent in September when the Fed first delayed a widely-anticipated tapering decision.

Against the yen, the dollar was steady at 98.17 yen JPY=, also close to a one-week high.

The euro meanwhile held firm at $1.3741, and showed little reaction to data confirming that Spain's economy emerged from recession between July and September after contracting for nine quarters.

Commodity markets were mostly holding their ground as the Fed announcement neared, with gold seen the most exposed to any extension in the Fed's money printing programme due its role as protector against the ravages of any future inflation.

Gold has risen about 7 percent from a three-month low on October 15 when investors began to price in a tapering delay and was up 0.2 percent at $1,346.11 an ounce.

Conversely, Brent crude oil slipped slightly as the Fed announcement neared and was trading under $109 a barrel though prices were expected to be supported by the announcement.

"If (the Fed) acts as expected and there is no change in their position, it will likely support oil prices, but not cause them to be pushed up significantly," Tetsu Emori, a commodities fund manager at Astmax Investments, said.

Brent oil futures lost 7 cents to $108.94 a barrel while U.S. crude oil dipped 65 cents to $97.54.

Traders termed this partly a consolidation after a big gain on Monday when reports of a sharp drop in Libyan oil exports rekindled worries over global supply. (Additional reporting by David Sheppard; editing by Stephen Nisbet)

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Asian shares creep ahead, count on Fed being benign

By Wayne Cole

SYDNEY (Reuters) - Asian share markets took heart from record highs in U.S. stocks on Wednesday as investors wagered the Federal Reserve would rock no boats at its policy meeting and leave stimulus in place for the next few months at least.

Japan's Nikkei led the way with a gain of 1.2 percent, while Australian shares added 0.3 percent and Shanghai stocks 1 percent. MSCI's index of Asia-Pacific shares outside Japan crept up 0.5 percent.

European shares were expected to edge higher, too. Capital Spreads predicted Britain's FTSE 100 to open 13 points or 0.2 percent higher, Germany's DAX to gain 0.04 percent and France's CAC 40 to open flat.

A mixed bag of economic data caused few frowns since it merely reinforced expectations the Fed will maintain the status quo when its two-day policy meeting ends on Wednesday.

Even the U.S. dollar got a lift as dealers judged the prospect of easy money for longer had now been pretty much discounted following two months of losses.

Markets seem to be operating on the assumption that the Fed's policy statement will not challenge the growing consensus that any tapering of its $85 billion of monthly asset purchases will not start until March at the earliest.

Such an outcome would be taken as justifying the rallies in stocks and bonds seen in recent weeks and might have only a limited impact on prices in the near term.

But it also means markets are vulnerable to a surprise.

"With expectations of taper firmly kicked into 2014 the risk that the FOMC could decide to move earlier looks asymmetrical," said Patrick Perret-Green, an analyst at ANZ Bank.

"If the Fed does nothing tomorrow then nothing really happens but if they do something or even hint at moves in the not too distant future the effects could be dramatic."

The Fed's decision is due at 1800 GMT, though divining its true message may be tricky as no new economic forecasts are released and nor will Chairman Ben Bernanke be giving a news conference.

BE BORING, PLEASE

For now, markets are counting on the Fed being boring.

The Dow Jones industrial average ended Tuesday 0.72 percent higher at an all-time closing peak of 15,680.35.

The S&P 500 gained 0.56 percent, aided further by a jump in heavyweight IBM after the company's board of directors approved another $15 billion for stock buybacks.

The flow of economic data proved too mixed to offer direction. Industrial output bounced in Japan, but disappointed in South Korea due to strikes at automakers.

In the United States, a measure of core retail sales showed surprising resilience in September, yet a grim survey of consumers highlighted the heavy toll the recent government shutdown had taken on the public mood.

In currencies, dollar bears looked exhausted after two months of selling and the currency bounced broadly. The dollar index reached a one-week peak of 79.667, having climbed 0.5 percent on Tuesday. Just last Friday, it had plumbed a nine-month low at 78.998.

"Fed meetings have not been friendly to the USD this year, with the dollar weakening following every meeting in 2013 with the exception of June," analysts at BNP Paribas wrote in a client note.

"However, with markets already having adjusted to a much more dovish view on the Fed outlook, we think the USD is likely to hold up better this time."

The euro slipped to $1.3740, pulling away from a 23-month peak of $1.3833 set just a few days ago. The dollar firmed to 98.21 yen, from its recent trough of 96.94.

Yields on the benchmark 10-year Treasury note were steady at 2.506 percent after dipping from a high of 2.5360 on Tuesday. The market has enjoyed a substantial rally in the past two months with yields falling all the way from 3 percent.

Spot gold edged back to $1,344.51 an ounce as the dollar gained, but is still up more than 7 percent from a three-month low hit in mid-October.

Brent oil futures lost 36 cents to $108.65 a barrel while U.S. crude oil dipped 58 cents to $97.62.

Traders termed this a consolidation after a big gain on Monday when reports of a sharp drop in Libyan oil exports rekindled worries over global supply.

(Additional reporting by Vidya Ranganathan; Editing by Eric Meijer, Shri Navaratnam and Chris Gallagher)

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Australian shares lead Asian rebound; yen softens

By Ian Chua

SYDNEY (Reuters) - Australian stocks scaled a five-year peak on Monday, leading a rebound in Asia after strong results from the likes of Microsoft pushed Wall Street to another record closing high, while investors gave the safe-haven yen a wide berth.

MSCI's broadest index of Asia-Pacific shares outside Japan rose 0.7 percent, recovering a chunk of last week's 1.1 percent loss -- the biggest in two months -- that was driven by concerns that China may tighten policy to keep prices under control.

Australian shares put on 1.2 percent to reach their highest since June 2008, Hong Kong's Hang Seng added 0.4 percent, and South Korea's KOSPI rose 0.3 percent.

Japan's Nikkei climbed 1.0 percent, clawing back some of Friday's 2.7 percent drop.

"The market is getting bought back after excessive selling on Friday... but I don't think we will be testing new highs," said Kenichi Hirano, strategist at Tachibana Securities of the Nikkei.

Many traders suspect further gains in Asia may be limited as investors keep a wary eye what steps Chinese policymakers might take to cool property prices and inflation.

Several markets in Asia are closed for public holidays on Monday, including New Zealand and the Philippines.

RISK IN PLAY

With risk appetite on the mend, demand for the safe-haven yen waned. That saw the Australian dollar gain 0.5 percent to 93.68 yen, and both the euro and dollar edged up slightly to 134.74 and 97.52 respectively.

Against the dollar, the euro was a tad firmer at $1.3814 and within striking distance of Friday's two-year high of

$1.3833.

The dollar has been under broad pressure in the past few weeks on growing expectations the Federal Reserve will maintain its massive stimulus programme into next year.

The Fed's policy-setting arm meets on Oct 29-30 and is expected to hold off any move to scale down its $85 billion monthly bond-buying programme.

Analysts reckon policymakers want to see the impact of the U.S. budget battle that took the country to the brink of a debt default and caused a partial government shutdown.

"The FOMC should be a non-event... the Washington debates cloud the growth outlook, so forget about tapering," analysts at JPMorgan wrote in a client note, adding the April 2014 meeting looked like the soonest start for any tapering.

In contrast to equities, commodities got off to a sleepy start with copper a touch lower at $7,178.25 a tonne, while U.S. crude oil slipped 0.1 percent to $97.72 a barrel. Spot gold was steady $1,352.44 an ounce.

(Additional reporting by Tomo Uetake in Tokyo; Editing by John Mair)

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World shares dip but tech earnings lift Wall Street

By Angela Moon

NEW YORK (Reuters) - World equity indexes edged down on Friday but were near five-year highs as strong earnings from major U.S. technology companies propelled Wall Street to another day of gains.

The euro dropped from a near two year-high against the dollar, pressured by a survey showing an unexpected fall in German business morale.

While equity markets in Europe and Asia were weaker, on Wall Street the S&P 500 was on track to close at an all-time high as shares of Amazon surged 9 percent and Microsoft rose 6.5 percent following their quarterly results. The Dow was also approaching its all-time high, and the Nasdaq touched its highest level in 13 years.

The S&P 500 has gained 23 percent so far this year, just shy of its 23.5 percent jump in 2009. Surpassing that level would give the index its biggest annual gain in a decade. The S&P 500 on Friday afternoon was on track for a third straight week of gains.

"We've been positive on Microsoft for a while, but I can't remember the last time I saw it move up this much after earnings. It is very positive, and helping to boost the overall tape today," said Douglas DePietro, managing director at Evercore Partners in New York.

"Still, the market has been getting tired lately. While I believe we'll see another leg up soon, it isn't out of the question that we would need to consolidate near all-time highs."

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

Nikkei futures index fell 1.6 percent following news that a large earthquake struck in the ocean east of Japan, triggering a small tsunami. There were no immediate reports of damage on land from the quake, classified as magnitude 7.1 by the Japan Meteorological Agency, which struck about 370 km (230 miles) out to sea.

Japan's Nikkei stock average suffered its biggest one-day loss in 2-1/2 months on Friday, hit by the yen's strength against the dollar.

On Wall Street, the Dow Jones industrial average was up 28.38 points, or 0.18 percent, at 15,537.59. The Standard & Poor's 500 Index was up 4.58 points, or 0.26 percent, at 1,756.65. The Nasdaq Composite Index was up 11.45 points, or 0.29 percent, at 3,940.41.

The better-than-expected earnings late on Thursday from Amazon Inc and Microsoft boosted investor confidence in an earnings season that has been slightly disappointing, though Google Inc topped expectations. Next week's earnings spotlight will be on tech companies like Apple Inc and Facebook Inc .

European equities ended slightly lower on Friday, with Telecom Italia leading the telecoms sector down on concerns of a capital hike by the Italian company and Volvo hurting industrials after reporting a sharp drop in profits.

The pan-European FTSEurofirst 300 index closed 0.1 percent lower at 1,284.76 points, but for the week was up 0.6 percent for a third straight week of gains after hitting a five-year high on Tuesday.

In currency markets, the euro hovered close to a two-year high against the dollar as a souring of German business morale did little to dent bullish sentiment toward the euro zone common currency.

Still, the euro's fall was minimal and many analysts say the single currency could rise toward $1.40 as investors seek alternatives to a dollar hobbled by expectations the Federal Reserve will maintain its current level of monetary stimulus.

In afternoon New York trading, the euro was unchanged at $1.3804, not far from an earlier peak of $1.3833, its highest level since November 2011.

The dollar was up 0.1 percent against the yen at 97.38 yen, off a two-week low of 96.94 and above its 200-day moving average, a key chart level, at 97.34, suggesting room for more gains.

After a choppy week for commodities markets, Brent crude for December settled down 6 cents to $106.93 a barrel while U.S. crude oil ended up 74 cents at $97.85.

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

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

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 Leslie Adler)

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World shares flat but Wall Street gains; S&P 500 at new high

By Angela Moon

NEW YORK (Reuters) - World equity indexes were near five-year highs on Friday as major U.S. technology companies propelled Wall Street to another day of gains, sending the S&P 500 index to close at a record.

Reversing early weakness, the euro slightly rose against the dollar, hovering close to a two-year high, as souring German business morale did little to dent bullish sentiment toward the euro zone common currency.

While equity markets in Europe and Asia were weaker, Wall Street extended its recent climb, helped by gains in technology shares after strong results from Microsoft and Amazon.com . Microsoft shares ended up 6 percent at $35.73 while Amazon.com added 9.4 percent to $363.39.

The S&P 500 has gained about 23.4 percent so far this year, just shy of its 23.5 percent jump in 2009. Surpassing that level would give the index its biggest annual gain in a decade.

"It seems like good news is being responded to very well and bad news is just seen as more evidence the Fed won't be able to tighten anytime soon," said Rick Meckler, president of LibertyView Capital Management in Jersey City, New Jersey.

The market has risen following last week's deal to avoid a U.S. debt default and end a partial government shutdown, as well as increased speculation the Federal Reserve will delay scaling back its stimulus for several months. The S&P 500 had hit record finishes for four sessions until Wednesday.

MSCI's world share index, which tracks 45 countries, was flat near a five-year high, erasing early weakness.

Nikkei futures index fell 1.6 percent following news that a large earthquake struck in the ocean east of Japan, triggering a small tsunami. There were no immediate reports of damage on land from the quake, classified as magnitude 7.1 by the Japan Meteorological Agency, which struck about 370 km (230 miles) out to sea.

Japan's Nikkei stock average suffered its biggest one-day loss in 2-1/2 months on Friday, hit by the yen's strength against the dollar.

On Wall Street, the Dow Jones industrial average rose 61.07 points, or 0.39 percent, to 15,570.28, the S&P 500 gained 7.71 points or 0.44 percent, to 1,759.78 and the Nasdaq Composite added 14.401 points or 0.37 percent, to 3,943.361. For the week, the Dow rose 1.1 percent, the S&P 500 was up 0.9 percent and the Nasdaq added 0.7 percent.

European equities ended slightly lower on Friday, with Telecom Italia leading the telecoms sector down on concerns of a capital hike by the Italian company and Volvo hurting industrials after reporting a sharp drop in profits.

The pan-European FTSEurofirst 300 index closed 0.1 percent lower at 1,284.76, but for the week was up 0.6 percent for a third straight week of gains after hitting a five-year high on Tuesday.

In the currency market, the euro was up 0.1 percent at $1.3808, not far from an earlier peak of $1.3832, its highest since November 2011. Against the yen, the euro was up 0.2 percent at 134.48 yen.

The dollar was flat against a basket of six major currencies at 79.178, off a near nine-month low of 78.998.

U.S. Treasury debt prices rose, with benchmark yields hovering near three-month lows, as investors shifted their focus to the Federal Reserve meeting next week, where it might signal it will stick to the current size of its bond-purchase stimulus.

The bond market has traded in a tight range 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 10-year note yield was on track to fall for a second straight week, though it has struggled to decline much below the chart resistance of 2.50 percent.

After a choppy week for commodities markets, Brent crude for December settled down 6 cents at $106.93 a barrel while U.S. crude oil ended up 74 cents at $97.85.

(Reporting by Angela Moon; Editing by Dan Grebler)

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Asian shares slip, China looks set to tighten liquidity

By Dominic Lau

TOKYO (Reuters) - Asian shares fell in volatile trade on Thursday and the dollar came under pressure as a further spike in Chinese money-market rates tempered the effect of a survey showing a pick-up in manufacturing.

China's benchmark seven-day repo rates opened up nearly a full percentage point at 5 percent after the central bank let cash drain from the money market for a second week.

The Chinese central bank declined to inject cash for a third day as regulators showed signs of concern that loose liquidity might again be fuelling risky credit growth.

MSCI's broadest index of Asia-Pacific shares outside Japan dipped 0.1 percent after trading higher on the back of the preliminary survey on Chinese manufacturing sector. It had lost 0.9 percent on Wednesday to end a four-day winning streak.

China's CSI300 index seesawed in a choppy session after falling 2.1 percent in the previous two sessions, while Japan's Nikkei share average fell 0.7 percent, also hurt by a firmer yen against the dollar.

"I wouldn't add on any new positions from here," said Hong Hao, chief strategist at Bank of Communications International Securities.

"Cash demand is going to be high in October because people have to pay taxes and banks have to park reserves with the central bank, but I think people ought to see that the People's Bank of China has already tightened because they have not sold any yuan, allowing the yuan to spike," he added.

"Now with the property restrictions starting to appear, that usually doesn't bode well for the stock market."

Australian shares advanced 0.4 percent and the Australian dollar rose 0.4 percent to $0.9654 on the day. China is Australia's biggest export market.

Strong new orders drove the fastest expansion in China's manufacturing sector in seven months in October, according to the Markit/HSBC Purchasing Managers' Index, more evidence that the world's second-largest economy is stabilising although a strong rebound remains elusive.

CHINA PAIN

Before the concerns over China checked the market bullishness, global equity markets had been rallying after the resolution of the U.S. budget impasse and on expectations the Federal Reserve would extend its cheap money stimulus into 2014.

After a run of record highs, the U.S. Standard & Poor's 500 index fell 0.5 percent on Wednesday as shares of heavy-equipment maker Caterpillar and semiconductor companies tumbled after they reported earnings.

According to Thomson Reuters I/B/E/S, the one-month earning momentum for S&P 500 companies deteriorated to minus 3.6 percent from minus 1.5 percent last month.

U.S. S&P E-mini futures added 0.2 percent in Asian trade on Thursday.

The dollar was at 0.8916 franc, just above a two-year low of 0.8908 hit on Wednesday. It was holding at 97.325 yen, near a two-week low touched in the previous session.

Against a basket of major currencies, the dollar was down 0.1 percent at 79.196, within striking distance from an eight-month low of 79.137 touched on Wednesday.

U.S. Treasury yields fell to three-months lows on more bets that the Fed will maintain its stimulus into next year.

U.S. crude prices climbed 0.7 percent to about $97.5 a barrel after falling to a 3-1/2 month low of $96.16 on Wednesday.

Gold inched up 0.1 percent to around $1,334.4 an ounce, recouping some of Wednesday's lost ground.

(Additional reporting by Clement Tan in Hong Kong; Editing by Eric Meijer and Richard Borsuk)

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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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Asian shares try to find footing after tumble

By Dominic Lau

TOKYO (Reuters) - Asian shares tried to steady on Thursday following a tumble sparked by concerns about China's economic outlook, and the dollar languished near a two-year low against the Swiss franc.

On Wednesday, Chinese money-market rates rose to three-month highs after the central bank failed to inject cash for a second day as regulators showed signs of concern that loose liquidity might be fuelling another round of risky credit growth.

MSCI's broadest index of Asia-Pacific shares outside Japan was flat after shedding 0.9 percent on Wednesday to end a four-day winning streak.

Tokyo's Nikkei futures fell 0.8 percent as the yen gained ground on the dollar, indicating a softer open on Thursday after the previous session's 2 percent decline.

Investors will get further clues to the health of the world's second-largest economy with a preliminary survey on Chinese manufacturing activity data due at 0145 GMT.

"The initial reaction to the rise in China's money market rates has translated into lower U.S. Treasury yields and weaker equity markets," analysts at BNP Paribas wrote in a note.

"The pullback in risk sentiment should remain temporary as the delay to the Fed's QE tapering plans until the first quarter of 2014 makes long carry positions attractive. This implies that commodity and emerging market currencies should regain the ground lost over the past 24 hours."

Before the concerns over China checked the market bullishness, global equity markets had been rallying after the resolution of the U.S. budget impasse and on expectations the Federal Reserve would extend its cheap money stimulus into 2014.

After hitting a run of record highs, the U.S. Standard & Poor's 500 index fell 0.5 percent on Wednesday as shares of heavy-equipment maker Caterpillar and semiconductor companies tumbled after reporting earnings.

U.S. S&P E-mini futures were flat in early Asian trade on Thursday.

The dollar was at 0.8923 franc, just above a two-year low of 0.8908 hit on Wednesday. It was holding at 97.39 yen, near a two-week low touched in the previous session.

U.S. Treasury yields fell to three-months lows on more bets that the Fed will maintain its stimulus efforts into next year.

U.S. crude prices rose 0.2 percent to about $97 a barrel after falling to a 3-1/2 month low of $96.16 on Wednesday.

(Editing by John Mair)

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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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European shares at five-year highs, Asian markets gain

By Richard Hubbard

LONDON (Reuters) - Global shares hovered at five-year highs on Monday while the dollar edged up against the yen as investors looked ahead to a deluge of U.S. data for clues on when the Federal Reserve will begin scaling back its stimulus.

Many in the markets think the Fed will be wary of trimming its $85 billion-a-month bond-buying programme, which has supported riskier assets like shares, until the economic impact of a 16-day partial U.S. government shutdown becomes clearer.

"We're opening with a slightly positive tone ..., on the back of last week's decision to extend (U.S. fiscal) deadlines which is seen pushing back tapering from the Fed, a view which continues to support risky assets," said Richard McGuire, senior rate strategist at Rabobank.

European shares touched a fresh five-year high in early trade, though moves were limited ahead of the U.S. data, which begins with home sales numbers on Monday and includes the keenly watched non-farm payrolls report on Tuesday.

Expectations the Fed would have to delay lifted the broad S&P 500 index to a record closing high on Friday, marking its best weekly gain in three months as stronger-than-expected corporate earnings added to the positive tone.

Asian shares outside Japan followed on with a 0.2 percent rise to reach a five-month high on Monday. Australia's S&P/ASX 200 also touched a five-year peak, helped in part by data last week showing an improvement in economic growth in China - Australia's biggest export market.

MSCI's world equity index, which tracks shares in 45 countries, was holding near its own fresh five-year high reached last week.

RISK ON

In the currency market the greater prospect of a Fed delay weighed on the dollar against most currencies, as it would act to keep rates on U.S. debt lower than those offered by other major nations.

However, the U.S. currency rose against the safe-havens of the yen and the Swiss franc on expectations for a strong jobs report.

Against a basket of six major currencies, the dollar was steady at 79.70 not very far from Friday's low of 79.478, its weakest point since February.

The dollar edged up 0.4 percent against the Japanese yen to 98.01 yen, though below its near three-week high of 99.01 yen set last Thursday.

While some investors positioned for a strong non-farm payrolls reading on Tuesday others said an outcome more in line with expectations would see a limited response as the market was likely to wait for the effect of this month's partial government shutdown on the U.S. economy to become clear.

"It's going to take a while before we get what policymakers would consider a clean set of data. It may not come through until December or January," said Ian Stannard, head of European foreign exchange strategy for Morgan Stanley.

As a result, investors will not be expecting the Fed to take any decision on tapering until next year, which is likely to favour higher-yielding currencies like the Australian and Canadian dollars, Stannard said.

"We're going to see over the coming weeks quite a positive environment, more of a risk-on environment, starting to develop," he said.

With the dollar under pressure and the Fed expected to keep pumping in money to support the U.S. economy, commodities like gold were enjoying renewed demand.

Gold edged up to near one-and-a-half-week highs around $1,320 an ounce on Monday, having already gained 3.4 percent last week. Silver outperformed gold, rising 1.4 percent at $22.18 an ounce.

Brent crude oil saw more muted reaction, dipping under $110 a barrel as investors were waiting for the resumption of U.S. oil data along with the other economic numbers.

The U.S. Energy Information Administration will release weekly oil data for the week ended October 11 later on Monday. Its normal release schedule will resume after that, and oil data for last week will be released on Wednesday.

"The market's just in a wait-and-see mode ... The thing on most traders' minds is what sort of story is going to be told by the U.S. data now that it's going to be released again," said Ric Spooner, chief market analyst at CMC Markets.

(Additional reporting by Marius Zaharia and Jessica Jaganathan; Editing by Susan Fenton)

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BSE Sensex falls for second session; tech shares slump

By Abhishek Vishnoi

MUMBAI (Reuters) - The BSE Sensex fell on Thursday for a second consecutive session, as software services exporters such as Tata Consultancy Services slumped despite its quarterly results beating estimates as investors took profits after strong recent gains.

Traders said the July-September results had already been factored into share prices, with TCS hitting a record high on Tuesday and investors already looking ahead at earnings from other sectors that are expected to be weaker.

Meanwhile, market relief at an 11th-hour U.S. budget deal gave way to worries over the economic impact of the 16-day government shutdown and prospects of a re-run early next year.

"The better results of Nifty have come. So don't generalise Nifty results on the basis of the likes of Infosys, TCS, IndusInd Bank etc. The ones that will come in later are going to surprise negatively," said Jyotheesh Kumar, executive vice president of HDFC Securities.

The Sensex fell 0.64 percent, or 132.11 points, to end at 20,415.51, for a second day of falls after climbing to its highest intraday level since November 2010 on Tuesday.

The broader Nifty fell 0.71 percent, or 43.20 points, to end at 6,045.85.

TCS fell 4.8 percent after hitting an all-time high of 2,258.85 rupees on Tuesday, and Infosys Ltd ended 2.6 percent lower as investors took profits.

TCS said late on Tuesday its consolidated net profit for the quarter rose 34 percent to 47 billion rupees compared with an average of 44.

HCL Technologies Ltd slumped 6.

Among other IT stocks, Wipro Ltd fell 3.1 percent, while Tech Mahindra Ltd ended 3.4 percent lower.

Larsen and Toubro Ltd fell 4 percent on caution ahead of its September quarter results on Friday.

Credit Suisse downgraded Larsen and Toubro to "underperform" from "neutral" and cut the price target to 713 rupees from 955 rupees, saying it expects the company's domestic order flow to have slowed down.

Tata Motors Ltd fell 4 percent, heading for its second day of decline after hitting a record high of 393.30 rupees on Monday.

South Indian Bank Ltd shares fell 1.2 percent after the lender said non-performing loans rose to 1.39 percent in July-September versus 0.86 percent a year earlier.

Among the gainers, Bajaj Auto Ltd , India's second-largest motorcycle maker by sales, rose 1.3 percent after the company reported July-September profit that beat analyst estimates.

Apollo Tyres Ltd shares rose 2.6 percent after the company said on Monday its lenders were unlikely to approve its bid for U.S.-based Cooper Tire & Rubber Co unless the $2.5 billion price tag was cut to take account of unresolved labour disputes.

(Editing by Prateek Chatterjee)

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