GLOBAL MARKETS-Shares dip after rally, dollar jumps

Thu Jan 3, 2013 11:42am EST

Related Topics

* World shares ease from 18-month highs

* Concerns grow over U.S. battles to cut spending, raise debt ceiling

* Dollar index hits three-week high, euro falls

* Brent oil falls below $112 a barrel

By Rodrigo Campos

NEW YORK, Jan 3 (Reuters) - World stocks dipped on Thursday as traders took profits after equities hit an 18-month high in the previous session, while the U.S. dollar climbed to a three-week high against a basket of currencies on concerns about more budget wrangling in Washington.

Data suggesting some momentum in the U.S. economy as the year ended showed private-sector employers stepped up hiring in December, limiting losses in stocks and further supporting the greenback.

"The report now sets the stage as we expect a strong non-farm payroll reading on Friday," said Andrew Wilkinson, chief economic strategist at Miller Tabak & Co in New York.

President Barack Obama and congressional Republicans face two more months of tough talks on spending cuts and an increase in the nation's debt limit as the hard-fought deal to avert the "fiscal cliff" of automatic tax hikes and spending cuts covered only taxes and delayed decisions on expenditures until March 1.

The MSCI world equity index dipped from an 18-month high before edging higher at 347.21. European stocks were up 0.4 percent.

The Dow Jones industrial average slipped 2.23 points, or 0.02 percent, at 13,410.32. The Standard & Poor's 500 Index was up 1.67 points, or 0.11 percent, at 1,464.09. The Nasdaq Composite Index was up 5.01 points, or 0.16 percent, at 3,117.28.

The dollar was up 0.4 percent against a basket of major currencies at a three-week high of 80.13, although it slipped 0.5 percent against the yen to 86.88.

"We really just kicked the can down the line and we're set up for another fight on the hill in the next month and a half or so," said John Doyle, currency strategist at Tempus Consulting in Washington. "That put a damper on overall risk appetite."

The euro, which had touched an 8-1/2 month high against the dollar on Wednesday, was down 0.6 percent at $1.3108.

The benchmark 10-year U.S. Treasury note was down 6/32, the yield at 1.8565 percent.

DOLLAR JUMP HITS COMMODITIES

The dollar's strength and rising oil supplies pushed crude prices lower, with Brent down 0.5 percent to under $112 a barrel. U.S crude futures were down 0.2 percent at $92.96.

Analysts expect oil prices to drop in 2013 as supply outweighs demand, especially after U.S. crude production hit a 19-year high in 2012 and Russia pumped more oil to remain ahead of Saudi Arabia in production.

Gold futures followed commodities lower and were down about 0.6 percent at $1,678.40 an ounce.

Thursday's retreat across riskier asset markets might have been sharper but for data showing activity in China's services sector and at U.S. factories expanded in December, brightening the outlook for global growth.

China's official purchasing managers' index for the non-manufacturing sector rose to a four-month high in December, adding to signs of a revival in the world's second-largest economy.

Investors will now turn their attention to Friday's December U.S. employment report. It is expected to show modest job growth of around 150,000, compared with 146,000 in November.

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