GLOBAL MARKETS-Yen dives as BOJ mulls more easing, Wall St lower

Mon Dec 2, 2013 11:04am EST

* Yen tumbles as BOJ considers more easing -sources
    * U.S. stocks steady on robust economic data
    * Euro, shares dip after mixed European data
    * Sterling at trade-weighted five-year high

    By Barani Krishnan
    NEW YORK, Dec 2 (Reuters) - The yen tumbled on Monday after
sources told Reuters the Bank of Japan was considering expanding
its already massive economic stimulus, while U.S. stocks slipped
after eight straight weeks of gains.
    Sterling hit a five-year high on signs the British economy
was outpacing its European neighbors.
    U.S. Treasuries yields also rose as bond investors turned
cautious ahead of a data-heavy week that will culminate in
Friday's November U.S. jobs report, which markets are
anticipating for guidance on the Federal Reserve's stimulus.
    "It's all defense into Friday's number," said Tom Tucci,
head of Treasuries trading at CIBC in New York.
    Gold  fell nearly 2 percent to below $1,230 an ounce,
undermined by concerns that a stronger U.S. economy will lead
the Fed to reduce its stimulus. Gold has lost around a quarter
of its value so far this year, on course for its first annual
loss in 13 years.
    The benchmark 10-year U.S. Treasury note was
down 15/32, its yield at 2.7933 percent.
    On Wall Street, the Dow Jones industrial average was
off 30.44 points, or 0.19 percent, at 16,055.97. The Standard &
Poor's 500 Index was up 0.28 points, or 0.02 percent, at
1,806.09. The Nasdaq Composite Index was down 0.58
points, or 0.01 percent, at 4,059.31. 
    The yen hit a more than six-month low versus the dollar and
weakened toward a five-year trough against the euro after
sources told Reuters that the Bank of Japan was looking to go
beyond its $70 billion-a-month bond-buying operation.
    The dollar rose as high as 103.03 yen, the strongest
since May 23, according to Reuters data, and was last up 0.6
percent at 102.98 yen.
    The euro rose 0.3 percent to 139.49 yen. 
    Against the dollar, the euro shed 0.3 percent to $1.3543
, retreating from Friday's one-month high of $1.3621.
    The BOJ's options include major purchases of stock market
linked funds or other assets riskier than Japanese government
bonds, according to officials briefed on the process.
    "There's no sense that further stimulus is imminent," said
one of the officials, adding that the central bank's inflation
target is still a long way off. "There's no harm in thinking
about options." 
    Markets are figuring on further stimulus from the BOJ
sometime next year on concerns that the economy and inflation
will lose some momentum.
    BOJ Governor Haruhiko Kuroda stressed on Monday that Japan
was on course to secure sustainable inflation of 2 percent in
two years, a target set when the central bank announced a
massive burst of money printing in April to double base-money
supply. 
    The U.S. economic outlook brightened after a gauge for
factory activity hit a 2-1/2-year high in November and
construction spending increased solidly in October.
    The Institute for Supply Management said its index of
national factory activity rose to 57.3 last month -- the highest
reading since April 2011. The index was at 56.4 in October.  
    November was the sixth consecutive month of faster growth in
the goods-producing sector since a contraction in May. 
    A separate report from the Commerce Department showed
construction spending increased 0.8 percent to the highest level
since May 2009. Economists polled by Reuters had expected an
increase of 0.4 percent.
    Financial data firm Markit, meanwhile, said its
manufacturing index hit 10-month highs in November.
 
    Sterling surged to a five-year high after data showed
UK manufacturing grew at its strongest rate in almost three
years, adding to recent talk that the Bank of England may not be
able to hold off from raising interest rates next year.
    At the same, euro zone stocks were sent stumbling by
disappointing equivalent figures from France and Spain that
underscored the ongoing split in fortunes between them and euro
zone powerhouse Germany. 
    "You have seen the PMIs and some are better than others, but
what is does seem to point to is a diverging European economy,
and that is a bit of a worry," said Michael Hewson, senior
markets analyst at CMC Markets in London.
    Britain's FTSE 100 was down 0.6 percent. Milan's
main index fell 1 percent and Madrid dropped
0.8 percent.
    Debt and currency markets told a similar story. 
    Bonds from core euro zone countries Germany and the
Netherlands, as well as France, Italy and Spain all lost ground,
as did the euro, which hit an 11-month low vs the pound.
  
    The European Central Bank meets on Thursday, but having
surprised markets by cutting rates last month, the ECB is
expected to sit on its hands at this meeting.
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