Stimulus fears haunt share markets, dollar recovers
NEW YORK (Reuters) - Global equity markets slipped on Friday over worries the U.S. Federal Reserve may curb a stimulus program that has lifted stocks, while the dollar recovered against the euro after better-than-expected U.S. durable goods data for April.
Wall Street pared earlier losses to end near break-even, with the Dow edging into positive territory at the close, reflecting a willingness to keep the equity rally alive.
"This has been happening all week. Investors are taking advantage of down days to put more cash to work, especially when the decline is not based on something fundamental," said Tim Ghriskey, chief investment officer of Solaris Asset Mangement in Bedford Hills, New York.
U.S. and European shares marked their first weekly decline in five weeks after testimony by Fed Chairman Ben Bernanke earlier in the week sparked speculation the U.S. central bank will soon trim its support for the economy.
The Fed's purchase of Treasuries and mortgage-backed securities, being conducted at a monthly pace of $85 billion, has been a boon to equities markets and other riskier assets.
Bernanke's congressional testimony on Wednesday and the release that day of minutes from the latest Fed policy-setting meeting produced a shift that "reintroduced a sense of caution that has long been absent" in markets, said Peter Kenny, chief market strategist at Knight Capital in Jersey City, New Jersey.
The Fed minutes showed that some policymakers were willing to consider scaling back on bond purchases as early as the Fed's June meeting.
"Now the market has heard Bernanke and seen the minutes and we're seeing some better data, the market is going to start to decide where they think the Fed is going, sooner than later," said Jason Rogan, managing director of Treasuries trading at Guggenheim Partners in New York.
MSCI's all-country world equity index .MIWD00000PUS fell 0.06 percent, while Europe's broad FTSE Eurofirst 300 index .FTEU3 of leading shares closed down 0.27 percent to 1,226.58.
On Wall Street, the Dow Jones industrial average .DJI was up 8.60 points, or 0.06 percent, at 15,303.10. The Standard & Poor's 500 Index .SPX was down 0.91 point, or 0.06 percent, at 1,649.60. The Nasdaq Composite Index .IXIC was down 0.27 point, or 0.01 percent, at 3,459.14.
Gold prices initially rose, but then reversed course to trade lower. Spot gold prices fell $6.99 an ounce to $1,383.70. COMEX June gold futures closed at $1,386.6 per ounce, down $5.20.
Orders for long-lasting U.S. manufactured goods rose more than expected in April, a hopeful sign that a sharp slowdown in factory output could soon run its course.
New orders for durable goods increased 3.3 percent last month, the U.S. Commerce Department said, and it revised prior readings for orders to show a smaller decline in March than previously estimated.
The dollar extended its declines against the yen in afternoon trade and was on track for its biggest weekly loss in three years against the Japanese currency.
The euro was last at $1.2928, down about 0.05 percent against the dollar. Against the yen, the dollar was last 0.94 percent lower, at 101.07 yen.
Earlier, the euro had risen against the dollar after the monthly German Ifo survey showed that business morale improved more than expected in May. The data suggested that Germany, Europe's biggest economy, is picking up, making further euro zone monetary easing less likely.
Oil prices rebounded in late afternoon trading in New York after a report of a gasoline unit shutdown at a refinery and as traders bought contracts to cover short positions ahead of a long holiday weekend in the United States.
Genscape said it detected the shutdown of the 70,000 barrel per day fluid catalytic cracker at Irving Oil's 300,000 bpd refinery in St. John's, Canada.
Brent rose 20 cents to settle at $102.64 a barrel. U.S. crude fell 10 cents to settle at $94.15 a barrel.
U.S. Treasuries prices edged up as traders evaluated the likelihood of the Fed pulling back on bond purchases and whether the recent selloff was overdone.
The benchmark 10-year U.S. Treasury note was up 1/32 in price to yield 2.0107 percent.
(Reporting by Herbert Lash; Editing by Leslie Adler and James Dalgleish)