* Stocks, oil pare gains after Obama discusses fiscal cliff
* U.S. sentiment at 5-yr high; European shares pare losses
* Euro hits 2-month low vs dollar
* Gold set for biggest weekly gain since January
By Herbert Lash
NEW YORK, Nov 9 U.S. stocks and oil prices
gained on Friday on a rise in U.S. consumer sentiment to a more
than five-year high, outweighing gloom that the "fiscal cliff"
in the United States and Europe's economic woes may lead to a
Stocks later trimmed gains after President Barack Obama said
any deal with Congress to avert a fiscal crisis must come with
higher taxes on the wealthiest Americans.
U.S. Treasury bonds cut losses to trade almost flat on
Obama's remarks, in which the newly re-elected president invited
congressional leaders to the White House next week to start
The so-called fiscal cliff, aimed at cutting the federal
budget deficit, could take an estimated $600 billion out of the
economy in automatic spending cuts and tax hikes, severely
hindering economic growth.
"Clearly taxes are going up and that is something the market
doesn't like. There is concern the economy continues to weaken,
and there is not much left in the tank in terms of making
corporate profitability better," said Stephen Massocca, managing
director at Wedbush Morgan in San Francisco.
The surprisingly strong sentiment survey showed American
consumers felt more optimistic about employment prospects and
the economic outlook, according to a Thomson Reuters/University
of Michigan index, easing the gloom from Europe.
The MSCI world equity index has lost more
than 2 percent since Monday and looked set to close o n F riday
with a weekly decline that would be the steepest since June. The
index was little changed at 323.37.
In late trading, the Dow Jones industrial average was
up 12.65 points, or 0.10 percent, at 12,823.97. The Standard &
Poor's 500 Index was up 4.39 points, or 0.32 percent, at
1,381.90. The Nasdaq Composite Index was up 14.63
points, or 0.50 percent, at 2,909.99.
European shares provisionally ended flat, paring losses on
the U.S. data, which included a government report that wholesale
inventories rose in September by the most in nine months.
Inventories are a key element in the government's measure of
The FTSE Eurofirst 300 index of top European shares
closed down 0.05 percent at 1,097.18 after trading higher
briefly before the market's close.
Falling industrial output in France, Italy and Sweden and a
warning from a German ministry that Europe's largest economy
was expected to slow further rattled investors.
Also weighing on investors was news that euro zone finance
ministers are unlikely to release a new tranche of loans to
Greece on Monday because there is no agreement on how to make
its debt sustainable.
"It's the core Europe now, not just the peripheral Europe,
that may be sliding into a recession," said Boris Schlossberg,
managing director of FX Strategy at BK Asset Management in New
York. "If that happens, then China will lose its export market
and the whole global economy will begin to contract.
"The market is very afraid that Europe could drag the whole
global economy down."
Oil pushed higher in choppy trading, lifted by the improved
U.S. consumer sentiment and Chinese data indicating a
U.S. crude futures gained 98 cents to settle at
$86.07 a barrel, while Brent futures settled $2.15
higher at $109.40 a barrel.
The euro dropped to a two-month low against the U.S. dollar
and could extend losses as fears mount that the euro zone's debt
crisis and deteriorating economic conditions could drag on
global economic growth.
The euro was down 0.23 percent at $1.2715 and was
seen vulnerable to further losses. The dollar index rose
0.3 percent to 81.014.
Gold hit a three-week high of $1,738.66 an ounce
before pulling back slightly. Spot gold prices rose 97 cents to
Prices of safe-haven U.S. Treasuries slipped as stock gains
sparked by improved consumer sentiment whetted investors'
appetite for riskier assets.
The benchmark U.S. Treasury 10-year note fell 1/32 in price
to yield 1.6148 percent.