GLOBAL MARKETS-World stocks dip after China, U.S. services data; gold up

Mon Jan 6, 2014 2:41pm EST

* MSCI world share index down after weak China data

* S&P 500 down slightly after U.S. services data

* Safe-haven bond prices gain ground

By Caroline Valetkevitch

NEW YORK, Jan 6 (Reuters) - World stock indexes dipped on Monday after services sector data in China and the United States revived concerns about slow growth, while gold climbed to its highest in three weeks.

U.S. Treasuries prices rose after the U.S. data, which raised questions about whether the Federal Reserve might slow its reduction of bond purchases.

The private index of U.S. service industry activity unexpectedly fell in December. It goes against recent U.S. data, including last week's factory activity report, that confirmed underlying strength in the economy and suggested the Fed was justified in deciding in December to begin scaling back its stimulus program.

Outside the United States, figures showing that China's services sector growth slowed sharply last month added to a stack of disappointing data from the world's second-largest economy over the past week.

MSCI's world stock index, which tracks 45 countries, was down 0.2 percent, while all three major U.S. stocks indexes were lower.

The Dow Jones industrial average fell 7.9 points or 0.05 percent, to 16,462.09, the S&P 500 lost 2.6 points or 0.14 percent, to 1,828.77 and the Nasdaq Composite dropped 14.677 points or 0.36 percent, to 4,117.229.

Traders are still second-guessing the Fed's assessment of recent economic data and how it might alter the U.S. central bank's plan to withdraw its quantitative easing stimulus, said Peter Jankovskis, co-chief investment officer at OakBrook Investments in Lisle, Illinois.

"On balance, today's data is not going to raise concerns the Fed may accelerate the taper," he said.

Wednesday's impending release of the minutes of the December meeting of Fed policymakers and Friday's non-farm payrolls data could give further clues on how quickly the Fed is likely to scale back its huge stimulus program in the coming months.

The U.S. Senate is set to vote at 5:30 p.m. (2230 GMT) to confirm Janet Yellen as the next chair of the Fed. Yellen, who has been the Fed's vice chair since 2010, is poised to become the first woman to head the U.S. central bank. She is widely seen as continuing the policies set in place by Ben Bernanke, who will step down as Fed chairman at month's end.

The U.S. and Chinese data was somewhat offset by positive euro zone data and other U.S. data that was upbeat. Data showed some signs of gradual recoveries in Italy and Spain, while a report showed a rebound in new orders for U.S. factory goods.

Still, the pan-regional FTSEurofirst 300 ended down 0.2 percent after erasing earlier gains.

The euro zone Composite Purchasing Managers Index, which gauges how thousands of manufacturing and services companies fare every month, rose to 52.1 in December, in line with forecasts, with readings above 50 indicating growth.

The dollar slipped against the euro and yen after the weaker-than-expected data gauging the U.S. services sector.

The euro recovered from a one-month low to trade 0.4 percent higher at $1.3638, while the dollar was last down 0.2 percent to 104.64 yen, according to Reuters data.

In the U.S. bond market, U.S. Treasuries prices rose after the U.S. services sector data spurred bids for government debt.

The benchmark 10-year U.S. Treasury note rose 8/32 in price to yield 2.965 percent, down 3 basis points from late on Friday.

"We had a run of stronger-than-expected data in December that pushed the 10-year yield above 3 percent. We are now seeing some weaker data so we are seeing it falling below 3 percent," said Stan Shipley, bond strategist at ISI Group in New York.

CHINA DATA

There was plenty of evidence to support the caution China data has fostered among investors.

Figures on Monday showing China's huge services sector slowed sharply in December to its lowest point since August 2011 came hot on the heels of a similar official survey on Friday and two other PMIs last week showing factory activity also soured.

GOLD, BRENT OIL RISE

Gold rose to its highest in three weeks, as declines in the dollar and equity markets drew investors to the asset.

Spot gold was trading up 0.4 percent at $1,241.40 an ounce, having earlier hit a one-week high of $1,248.30.

Brent crude oil edged higher as reports of restarted production at a Libyan oilfield, which hinted at more supply, were outweighed by doubts about its ability to reach markets.

Brent crude futures for February rose 3 cents to $106.92 at 1:12 p.m. EST (1812 GMT) after earlier climbing over $1 to a session high of $107.96. U.S. crude fell 54 cents to $93.42 per barrel. The contract lost $1.48 a barrel on Friday and posted its biggest weekly drop since June 2012.

"We're still seeing most of the geopolitical risk hitting Brent, whether it be Libya or Iraq," said Phil Flynn, analyst at the Price Futures Group in Chicago.

A couple walks along the rough surf during sunset at Oahu's North Shore, December 26, 2013. REUTERS/Kevin Lamarque

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