GLOBAL MARKETS-Yields rise on factory data, possible stimulus hits yen

Mon Dec 2, 2013 1:01pm 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) - U.S. stocks rebounded slightly
from a weak start on Monday after robust factory data that
pointed to steady economic growth, while the yen tumbled on news
that the Bank of Japan is considering expanding its stimulus.
    The Institute for Supply Management said the U.S.
manufacturing sector expanded last month at its fastest pace
since April 2011, outstripping forecasts, and data showed
construction spending also exceeded expectations. That boosted
the price of oil and caused selling in the U.S. bond market.
    U.S. Treasuries prices fell and yields rose in what will be
a data-heavy week that will culminate in Friday's November U.S.
jobs report. More strong data will boost expectations for the
Federal Reserve to reduce its bond-buying stimulus.
    Around 1 p.m., the benchmark 10-year U.S. Treasury note was
down 17/32, its yield at 2.8006 percent. 
    The mood on Wall Street was cautious after
less-than-encouraging holiday season sales. The S&P 500 rose
slightly after eight straight weeks of gains, while the Dow and
tech-heavy Nasdaq were flat.
    "We're not expecting a severe pullback, but we're not
jumping into the market with both feet, given how far we've
come, and that there are no real catalysts," said John Norris,
managing director of wealth management with Oakworth Capital
Bank in Birmingham, Alabama.
    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.
    In Japan, the central bank'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 Bank of Japan'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.
    Brent crude oil hit a 2-1/2 month high above $111 a
barrel, while U.S. crude added 91 cents to $93.63. 
    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 Dow Jones industrial average was up 3.60 points,
or 0.02 percent, at 16,090.01. The Standard & Poor's 500 Index
 was up 4.13 points, or 0.23 percent, at 1,809.94. The
Nasdaq Composite Index was up 1.95 points, or 0.05
percent, at 4,061.84. 
    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.
    Sterling hit a five-year high on signs the British economy
was outpacing its European neighbors.
    "It's all defense into Friday's number," said Tom Tucci,
head of Treasuries trading at CIBC in New York.
    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.
 
    Even so, heavy discounting took a toll on U.S. retail sales
during the Thanksgiving weekend as shoppers spent almost 3
percent less than they did a year earlier, according to an
industry group. 
    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. 
    Britain's FTSE 100 was down 0.6 percent. Milan's
main index fell 1 percent and Madrid dropped
0.8 percent, contributing to a 0.3 percent drop in the
FTSEurofirst 300 index.
    MSCI's gauge of world stock markets slipped
0,2 percent.
    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.
A couple walks along the rough surf during sunset at Oahu's North Shore, December 26, 2013. REUTERS/Kevin Lamarque

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