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GLOBAL MARKETS-US shares fall, euro down on Spain concerns

by on September 25, 2012 8:34 pm GMT
 

Tue Sep 25, 2012 4:34pm EDT

* Stock markets looking for catalyst to extend rally

* Stimulus expectations still underpin markets

* Euro falls vs dollar on Spanish concerns

NEW YORK, Sept 25 (Reuters) – U.S. stocks declined on
Tuesday as investors sought a catalyst to justify further gains
while the euro was under pressure on concerns about a bailout
for debt-laden Spain.

The euro fell and is now around two cents from the
4-1/2-month peak posted against the U.S. dollar last week.
Renewed worries about global growth also weighed on markets.

Earlier Wall Street had been buoyed by end-of-quarter buying
by funds and a higher-than-expected reading of confidence among
American consumers.

But as the day wore on in New York and major U.S asset
manager BlackRock said the strong equity rally this year has run
its course, the gains were erased and stocks declined.

This is “a market that has rallied and climbed a wall of
worry. Right now the market is getting skittish and looking for
reasons for buyers to be less aggressive,” said Jim Fehrenbach,
head of equity distribution at Piper Jaffray in Minneapolis.

The Dow Jones industrial average was down 101.67
points, or 0.75 percent, at 13,457.25. The Standard & Poor’s 500
Index was down 15.28 points, or 1.05 percent, at
1,441.61, snapping a three day advance. The Nasdaq Composite
Index was down 43.06 points, or 1.36 percent, at
3,117.73.

The MSCI world equity index fell 0.5 percent
to 334.52. European shares gained 0.4 percent but that
was before the BlackRock news reached investors.

U.S. stocks did rise at the open after comments late on
Monday from the President of the San Francisco Fed John Williams
suggested the central bank was not done taking action to
stimulate the economy.

That initially helped offset a pessimistic outlook from
Caterpillar but then Philadelphia Fed President Charles
Plosser countered on Tuesday that the latest monetary stimulus
will not do much to boost economic growth or lower unemployment.
[ID: nL1E8KP91T].

All the negative news ultimately outweighed the good,
including a private sector report showing U.S. consumer
confidence jumped to its highest level in seven months in
September.

Caterpillar shares fell 4.2 percent. On Monday,
Caterpillar Inc cut its 2015 profit outlook, warning that weaker
commodity prices would result in a bigger-than-expected decline
in demand.

NO HUGE BETS

U.S. data showed single-family home prices rose for a sixth
month in a row in July, though the improvement was not as strong
as expected.

The euro fell 0.2 percent to $1.2907.

The overall support for the single currency’s rally in
recent weeks was the European Central Bank’s offer to provide
bailout funds to indebted governments – if they seek its help
and are willing to accept tough conditions.

But investors were not making huge bets.

“Fears about Europe’s situation remain among investors, with
the focus mostly on Spain, but Greece is also still a concern,”
said Kimihiko Tomita, head of foreign exchange for State Street
Global Markets in Tokyo.

At the center of market concerns is what happens next in
Spain. The government is due this week to present its draft
budget for 2013, outline new structural reforms for the economy
and release the results of stress tests on the banking sector.

U.S. Treasury debt prices were higher.

The benchmark 10-year U.S. Treasury note was up
13/32, with the yield at 1.6697 percent.

GROWTH CONCERNS

After the recent central bank actions, many investors have
become convinced that markets can rally further. But they
believe any gains are highly dependent on signs the slowdown in
the global economy has bottomed.

“The majority of central banks are in total, outspoken
reflationary mode. That’s a big story,” said Didier Duret, chief
investment officer at ABN Amro Private Banking in London.