GLOBAL MARKETS-Euro falls on potential ECB rate cut; stocks slip
* Global equity markets fall although factory activity gains * Euro under pressure after biggest fall vs dollar in 6 mths * Oil declines on strong dollar * Bond prices fall on rosy surveys of factory activity By Herbert Lash NEW YORK, Nov 1 (Reuters) - Global equity markets slipped on Friday despite upbeat factory data worldwide, while the euro fell to a two-week low against the dollar on growing expectations the European Central Bank will ease monetary policy further to encourage growth. Stocks on Wall Street see-sawed after data showing U.S. manufacturing expanded briskly in October raised some worries that the U.S. Federal Reserve may scale back its massive stimulus much sooner than expected. U.S. equities have been pressured since a Fed statement on Wednesday raised concerns about when the central bank would begin to scale back its stimulus program, which has fueled the benchmark S&P 500 index's 23-percent rally this year. The Institute for Supply Management (ISM) said its index of U.S. factory activity rose to 56.4 last month - its best showing since April 2011 - from 56.2 in September. Economists polled by Reuters had expected a reading of 55. The S&P and Dow Jones industrial average have repeatedly hit record highs this year, including earlier in the week, but the strong gains have triggered some concerns about how much further the rally can continue. With almost three-fourths of S&P 500 companies reporting results so far, 68.5 percent have beaten profit expectations, above the long-term average of 63 percent, according to Thomson Reuters data. However, only 53.3 percent have topped revenue forecasts, below the 61 percent average since 2002. "I'm not comfortable with the market at all-time highs, especially with earnings being mediocre," said Mark Grant, managing director at Southwest Securities in Fort Lauderdale, Florida. "But the manufacturing report was better than expected, and where else can you go with the Fed putting so much liquidity into the system?" Grant said. The Dow Jones industrial average was up 54.71 points, or 0.35 percent, at 15,600.46. The Standard & Poor's 500 Index was up 2.32 points, or 0.13 percent, at 1,758.86. The Nasdaq Composite Index was down 6.04 points, or 0.15 percent, at 3,913.67. European stock markets eased off five-year highs amid signs of weakness in regional corporate earnings. The pan-European FTSEurofirst 300 index of leading European companies fell 0.31 percent to close at 1,289.52. U.S. Treasuries prices fell for a third consecutive session as the encouraging ISM report on manufacturing suggested the U.S. economy overcame a drag from the partial government shutdown in October. The rosier data revived some worries among investors that the Fed might scale back its bond-buying earlier than expected - at its December meeting - rather than early in 2014. "There is a feeling that they might taper in December. It has gained a little steam, but that's not the consensus," said Matt Duch, a portfolio manager at Calvert Investments in Bethesda, Maryland. The benchmark 10-year U.S. Treasury note was down 21/32 in price to yield 2.6181 percent. Euro zone bonds broadly edged higher, extending this week's rise, after data showed a surprisingly sharp inflation slowdown in the euro zone. Many in the market expect the ECB to signal a rate cut or new liquidity injections at its meeting next week. German two-year yields, the most sensitive to shifts in monetary policy expectations, were 1 basis point lower at 0.11 percent. Bund futures fell 15 ticks to settle at 141.85, having hit a two-month peak of 142.32 on Thursday. Expectations for an ECB rate cut were seen eroding the euro's interest rate advantage over other major currencies. The single currency was poised to notch its worst weekly loss against the dollar since July 2012. The euro fell 0.66 percent to $1.3492. Renewed pressure on the euro saw the dollar index rise to a six-week high of 80.785, climbing further from a nine-month trough of 78.998 plumbed a week earlier. It last traded at 80.719. The dollar was up 0.39 percent against the yen at 98.74 yen, according to Reuters data. Oil prices fell broadly, heading for a large weekly percentage decline, as a strong dollar and ample supplies outweighed concerns about a drop in Libyan crude exports. Brent crude for December delivery fell $2.93 to settle down at $105.91 after rising as high as $109.41 a barrel in early trading. U.S. oil for December delivery settled down $1.77 at $94.61, putting it in line for a fourth straight week of declines, its longest losing streak since June 2012.
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