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World stocks, commodities fall on stronger dollar

NEW YORK: World equities fell on Monday as commodity shares sank on a stronger dollar in the wake of Japanese intervention to weaken the yen, and doubts resurfaced over the European Union's plan to stem its debt crisis.U.S. crude futures shed 1.2 percent as the greenback jumped to a three-month high against the yen, causing...

SAMAA | - Posted: Oct 31, 2011 | Last Updated: 9 years ago
SAMAA |
Posted: Oct 31, 2011 | Last Updated: 9 years ago
World stocks, commodities fall on stronger dollar

NEW YORK: World equities fell on Monday as commodity shares sank on a stronger dollar in the wake of Japanese intervention to weaken the yen, and doubts resurfaced over the European Union's plan to stem its debt crisis.U.S. crude futures shed 1.2 percent as the greenback jumped to a three-month high against the yen, causing dollar-priced commodities to be more expensive for investors holding other currencies.”After a solid month of gains, the (higher) dollar is giving traders a reason to shy from the risk trade and take some profits,” said Peter Cardillo, chief market economist at Rockwell Global Capital in New York.Japan sold the yen for the second time in less than three months, saying it intervened unilaterally to counter speculative moves that were hurting world's third-biggest economy. Traders estimated the Bank of Japan could have purchased $65 billion to $75 billion against its currency.The dollar, which had fallen to a record low of 75.31 yen earlier in Asian trade, rose more than 4 percent against to as high as 79.55 yen. It was up 2.9 percent at 77.96 yen with traders saying more intervention would likely be needed for a more durable impact.The euro gave up most of last week's gains on the dollar's broad-based advance. It was last 1 percent down at $1.400 , retreating further from a seven-week high about $1.4247 last Thursday following news of the euro zone's debt-rescue plan.It still looked set to end the month up nearly 5 percent for its best monthly performance in just over a year, but speculation about a possible interest rate cut on Thursday by the European Central Bank could limit its gains for now.The dollar could also come under pressure with Federal Reserve Chairman Ben Bernanke likely to repeat his disappointment at the pace of economic recovery when the Fed ends its two-day policy meeting on Wednesday.EUROPEAN DEBT PLAN DOUBTSTogether with the decline in the euro, equities gave back some of last week's gains.Lower metal prices from a firmer dollar hurt mining stocks, while banking shares succumbed to selling on renewed doubts over European leaders' plan to prevent their sovereign debt problem from spiraling into a global financial crisis.Japan told the head of Europe's bailout fund on Monday that it would continue to buy its bonds, but, like fellow potential investor China, did not commit to putting cash into a mooted special purpose vehicle to enhance the rescue fund's firepower.”Last week we saw a huge rise in equity markets largely on the revelation of a structure of a plan, with no detail on the funding,” said Jeremy Batstone-Carr, a strategist at Charles Stanley in London.The MSCI world equity index fell 1.2 percent, pulling back from its highest levels in nearly three months hit last week.U.S. stocks fell at the open as the spike in the U.S. dollar weighed on commodity prices and dried up bids on other risky assets.The Dow Jones industrial average fell 99.15 points, or 0.81 percent, at 12,131.96. The Standard & Poor's 500 Index lost 12.79 points, or 1.00 percent, at 1,272.30. The Nasdaq Composite Index dropped 30.10 points, or 1.10 percent, at 2,707.05.The pan-European FTSEurofirst 300 index was 1.3 percent lower after rising 4.1 percent last week, while emerging stocks shed 0.85 percent.The stock market sell-off rekindled bids for bonds. U.S. and German government bond prices advanced as peripheral euro zone government debt came under renewed pressure on ebbing euphoria over Europe's crisis-fighting plan.Italian 10-year government bond yields climbed back above 6 percent to levels last seen August before the ECB stepped in to buy Spanish and Italian debt in the secondary market.German Bund futures jumped more than a full point to 134.85, while the U.S. 30-year Treasury bond rallied 2 points in price to yield 3.25 percent.Spot gold prices fell more than 1 percent as the spike in the dollar spooked precious metals investors. Spot gold was last about 1 percent down at $1,724.60 after falling nearly 2 percent earlier. AGENCIES

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