GLOBAL MARKETS-Dollar strengthens, denting oil and gold; stocks stall
* Dollar firm after G7 backs Japan's easing efforts * Dollar hits 4-1/2-year highs versus yen * Oil, gold prices fall on dollar's strength * U.S., European stocks pause at recent highs By Richard Leong NEW YORK, May 13 (Reuters) - The dollar rose against the yen and held steady against most major currencies on Monday after the Group of Seven backed Japan's efforts to spur growth through aggressive asset purchases, and oil and gold prices fell on the stronger greenback. A surprise rise in U.S. retail sales in April supported views that the U.S. economy, the world's biggest, remains resilient. The optimistic tone to the data supported the dollar's recent strength, and JPMorgan raised its outlook for second-quarter growth.. On Wall Street, the broad S&P 500 index reversed earlier losses on profit-taking following last week's stellar run to record highs, while weakness in the top European banking sector knocked the region's share prices lower. "The value of the dollar has weighed on the prices of all commodities, specially the more sensitive ones such as oil and gold," said Harry Tchilinguirian, head of commodity market strategy at BNP Paribas. A stronger dollar makes dollar-denominated commodities such as oil more expensive for holders of other currencies. The renewed optimism on the economy after the retails sales data drove down prices of Treasuries, a traditional safe-haven. In over a week, the yield on the 10-year not has risen nearly 0.30 percentage point from its lowest level of the year following the better-than-expected April jobs report and the dollar's surge against the yen. The dollar, which has risen 5 percent against a basket of major currencies since February, and double that versus the yen, looked unlikely to buckle after G7 officials meeting over the weekend in Britain showed little concern about the Japanese currency's slump. The greenback hit a 4-1/2-year high of 102.14 yen in Asian trading, but it reversed course following the U.S. retail sales numbers, down 0.07 percent to 101.77 yen. The euro edged up 0.1 percent against the dollar at $1.2973. "Yen selling will have been encouraged by the outcome from the G7 meeting, where officials reiterated that they will tolerate yen weakness as long as it results from the use of domestic instruments to stimulate the Japanese economy," said Lee Hardman, a currency analyst with Bank of Toyko-Mitsubishi. Brent oil prices slipped back below $103 a barrel, with ample supply weighing on sentiment as well as the stronger dollar. Weaker-than-expected industrial output data from China also helped push oil prices lower. London copper, however, climbed 0.09 percent to $7,382 a tonne, as the data raised hopes that monetary authorities in China, the world's biggest metals consumer, may embark on further easing to underpin demand. China's annual industrial output grew 9.3 percent in April, up from a seven-month low of 8.9 percent in March but still missing market expectations for a 9.5 percent expansion. Spot gold, often bought as an alternative safe-haven to the dollar, fell 0.9 percent to 1,434.71 an ounce. STOCKS' POSITIVE TREND With the Standard & Poor's 500 index having closed at a record high on Friday and European shares starting the week at five-year highs, investors had reason to cash in some gains as worries about another spring "swoon" persisted. In midday trading, the Dow Jones industrial average was down 26.02 points, or 0.17 percent, at 15,092.47. The Standard & Poor's 500 Index was up 0.56 points, or 0.03 percent, at 1,634.26. The Nasdaq Composite Index was up 5.19 points, or 0.15 percent, at 3,441.77. The pan-European FTSEurofirst 300 index closed down 0.27 percent at 1,230.12, and the MSCI global index was down 0.02 percent at 374.14. In the bond market, benchmark 10-year Treasury notes fell 7/32 in price to yield 1.926 percent - just below a six-week high in yield set earlier. German Bund futures were up 0.1 percent at 144.84. Italy's three-year debt costs fell to their lowest level since January at an auction on Monday as the backstop from the European Central Bank fed demand for bonds of the euro zone's heavily indebted members. The head of Italy's central bank, Ignazio Visco, who is also a policymaker of the European Central Bank, in an interview with CNBC television suggested the ECB could cut its deposit rate below zero. His comments lifted Bund futures from their lowest levels in more than a month after last week's decline on upbeat euro zone and U.S. data. If the ECB were to push its deposit rate into negative territory, banks would effectively be charged for parking any spare cash they do not lend, something that analysts believe would send investors into other more profitable ultra-safe assets such as Bunds.
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