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GLOBAL MARKETS-US shares fall, euro pressured on Spain rescue

by on September 25, 2012 7:14 pm GMT
 

Tue Sep 25, 2012 3:14pm EDT

* Stock markets looking for catalyst to extend rally

* Stimulus expectations still underpin markets

* Euro little changed vs dollar on Spanish concerns

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

The euro was about two cents from the 4-1/2-month peak
posted against the U.S. dollar. 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.

The Dow Jones industrial average was down 52.02
points, or 0.38 percent, at 13,506.90. The Standard & Poor’s 500
Index was down 8.53 points, or 0.59 percent, at 1,448.36.
The Nasdaq Composite Index was down 26.55 points, or
0.84 percent, at 3,134.23.

The MSCI world equity index was little
changed at 336.288. European shares gained 0.4 percent.

“Any downdraft is going to be abbreviated with the
recognition of the fact the Fed has effectively put a floor in
the market, and it’s not just the Fed, it’s the ECB as well,”
said Peter Kenny, managing director at Knight Capital in Jersey
City, New Jersey.

“What we are kind of dealing with here is a rudderless ship
– there is no economic data to support any sort of robust buy
activity.”

U.S. stocks rose at the open after comments late on Monday
from the president of the San Francisco Fed suggested the
central bank was not done taking action to stimulate the economy
. That overshadowed a pessimistic outlook from
Caterpillar.

U.S. stocks were also supported early by a private sector
report showing U.S. consumer confidence jumped to its highest
level in seven months in September.

“There are some incrementally positive consumer numbers and
housing data,” said Dan Veru, chief investment officer at
Palisade Capital Management LLC in Fort Lee, New Jersey, which
oversees $3.6 billion. “It’s in the face of a weaker forecast
from Caterpillar, but it’s difficult to get too upset about
stuff they are talking about for 2015.”

Caterpillar shares fell 3 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 was also little changed at $1.2925.

The overall support for the single currency 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 mixed.

The benchmark 10-year U.S. Treasury note was up
7/32, with the yield at 1.6887 percent. The 2-year U.S. Treasury
note was down 1/32, with the yield at 0.2703 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.