Dollar jumps after U.S. data; bond prices slump
San Francisco (Sept 2) The dollar rose on Tuesday to its highest this year against the yen on strong U.S. manufacturing and construction data, while the euro slipped to a 12-month low on speculation the European Central Bank will move toward looser monetary policy.
U.S. oil prices fell more than $3 a barrel, leading shares in the energy sector to account for more than half the decline in the S&P 500. But the decline, in light volume, was not sharp and did not indicate an immediate bigger downturn, analysts said.
U.S. manufacturing hit a nearly 3-1/2 year peak in August and construction spending rebounded strongly in July, the latest signs of U.S. economic vigor.
The economic data lifted the dollar almost 0.8 percent against the Japanese yen, pushing it above the 105 yen mark for the first time since the first week of this year. The yen last traded at 105.13, up 0.75 percent on the day.
U.S. Treasuries US10YT=RR fell further on the data, with the 10-year note US10YT=RR down 20/32 in price to yield 2.4176 percent.
The euro EUR= sagged in early trade on bets ECB President Mario Draghi will do more to help a wobbly euro zone economy. The euro later recouped losses, down 0.03 percent at $1.3123.
Investors are waiting to see what Draghi does when ECB policy-makers meet on Thursday, said Ken Polcari, director of the NYSE floor division at O'Neil Securities in New York.
"If (the market) becomes disappointed on Thursday because Draghi does not announce something more accommodative or stimulative, then you'll see European markets under pressure and flow over into the U.S. markets, at least temporarily," he said.
Few investors expect immediate, major steps but most see looser ECB policy in the future as the euro zone fails to grow due to austerity measures and conflict in Ukraine.
MSCI's all-country world index .MIWD00000PUS of 45 countries fell 0.19 percent while the pan-European FTSEurofirst 300 index .FTEU3, which has risen nearly 7 percent from its mid-August low, closed down 0.07 percent at 1,375.93.
Wall Street was mixed.
The Dow Jones industrial average .DJI fell 53.6 points, or 0.31 percent, to 17,044.85. The S&P 500 .SPX slipped 4.35 points, or 0.22 percent, to 1,999.02 and the Nasdaq Composite .IXIC added 8.38 points, or 0.18 percent, to 4,588.65.
"The market is probably pricing in stronger numbers on the economic side but it's still very much positive," said James Liu, global market strategist at JPMorgan Funds, in Chicago.
"We are expecting to see stronger economic numbers, the market is certainly expecting that, and as long we get them we can do quite well above 2,000 on the S&P 500," Liu said.
Brent crude fell almost to $100 a barrel, pressured by worries about slowing oil demand growth in China and Europe, a strong U.S. dollar and ample supplies.
Brent crude for October delivery LCOc1 settled down $2.45 at $100.34 a barrel. U.S. crude CLc1 fell $3.08 to settle at $92.88 a barrel from Friday's close. There was no trading in the United States on Monday because of the Labor Day holiday.
Source: Reuters
