GLOBAL MARKETS-Stocks end down, yields rise; easing talk hits yen

Mon Dec 2, 2013 4:55pm EST

* U.S. stocks end broadly lower after see-sawing
    * Yen tumbles as sources say BOJ considering more easing
    * 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 closed down on
Monday after see-sawing through the day as robust economic data
failed to extend an eight-week market rally, and the yen tumbled
on news that the Bank of Japan was considering expanding its
stimulus.
    Treasuries sold off, causing their yields to rise, after the
Institute for Supply Management said the U.S. manufacturing
sector expanded last month at its fastest pace since April 2011,
outstripping forecasts.
    Construction spending also exceeded expectations, pushing
oil prices to 2-1/2 month highs as investors bet on a spike in
energy usage from the resulting higher economic activity. Gold
fell to a near 5-month low due to fewer reasons to hold the
precious metal as a hedge to economic weakening.
    The mood on Wall Street was cautious after
less-than-encouraging holiday season sales. The S&P 500 ended
lower after drifting between negative and positive territory.
The Dow and the tech-heavy Nasdaq fell back after a brief rise.
    "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 Dow Jones Industrial average fell 77.64 points,
or 0.48 percent, to 16,008.77. The Standard & Poor's 500 Index
 was down 4.91 points, or 0.27 percent, at 1,800.90. The
Nasdaq Composite Index was down 14.63 points, or 0.36
percent, at 4,045.26. 
    Bond prices fell 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.
    The benchmark 10-year U.S. Treasury note was down 17/32, its
yield at 2.8006 percent.
    "It's all defense into Friday's number," said Tom Tucci,
head of Treasuries trading at CIBC in New York.
    
    MORE BOJ EASING?
    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 expect further stimulus from the BOJ sometime next
year on concerns that the economy and inflation will lose some
momentum.
    
    OIL SOARS, GOLD SINKS
    Brent crude oil settled up 1.6 percent at $111.45 a
barrel. U.S. crude finished up 1.2 percent at $93.82.
 
    The spot price of gold fell nearly 2 percent to below
$1,220 an ounce, its lowest since July 9, 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 euro rose 0.2 percent to 139.36 yen. 
    Against the dollar, the euro shed 0.4 percent to $1.3539
, retreating from Friday's one-month high of $1.3621.
    Sterling hit a five-year high against the dollar on signs
the British economy was outpacing its European neighbors.
    
    U.S. OUTLOOK BRIGHTENS
    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 since
May 2009. Economists polled by Reuters expected an increase of
0.4 percent.
    Financial data firm Markit said its manufacturing index hit
a 10-month high 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 1.6442 pound to the dollar after
data showed UK manufacturing grew at its strongest rate in
almost three years, adding to recent talk that the Bank of
England might not be able to hold off from raising interest
rates next year.
    Britain's FTSE 100 was down 0.8 percent. Milan's
main index fell 1.5 percent and Madrid dropped
1 percent, contributing to a 0.3 percent drop in the
FTSEurofirst 300 index.
    MSCI's gauge of world stock markets slipped
0.4 percent.