* U.S. stocks flat on caution after Fed meeting
* Euro falls the most in 6 months versus U.S. dollar
* Treasuries prices down after strong U.S. data
By Rodrigo Campos
NEW YORK, Oct 31 The euro fell the most against
the dollar in six months on Thursday while the dollar rose
against major currencies on expectations of diverging policy
paths by the U.S. and European central banks.
The greenback's advance sent gold prices to their largest
drop in three weeks. Wall Street stocks were little changed and
U.S. Treasuries prices fell as investors assessed the likelihood
of when the U.S. Federal Reserve will begin to scale back its
stimulus, while a gauge of global equities fell the most in a
The Federal Reserve's outlook on Wednesday at the close of
its policy meeting was perceived as less dovish than expected.
By contrast, a drop in euro zone inflation to its lowest in
nearly four years reported on Thursday raised speculation the
European Central Bank will further ease monetary policy. The
euro fell on the inflation data, and the greenback extended
Market expectations that the Fed would continue its $85
billion a month bond-buying stimulus well into next year were
not fully met Wednesday, and some now see a chance for the Fed
to begin a wind-down in December.
The current pace of purchases has pressured the dollar and
driven Treasury yields lower, while boosting equities and some
commodities. Those trends were partially reversing on Thursday.
Data that showed business activity in the U.S. Midwest
surged in October, greatly exceeding expectations, countered
recent evidence of soft economic growth. New orders hit their
highest level since 2004, countering recent evidence of soft
"The Chicago PMI spiked higher significantly, showing
strength in manufacturing in that region, and the Fed is very
data dependent," said Tim Ghriskey, chief investment officer of
Solaris Group in Bedford Hills, New York.
"So there is going to be talk because of this that the Fed
is closing in on tapering bond purchases."
The Dow Jones industrial average fell 12.33 points or
0.08 percent, to 15,606.43, the S&P 500 gained 0.28
points or 0.02 percent, to 1,763.59 and the Nasdaq Composite
added 4.911 points or 0.12 percent, to 3,935.531.
The pan-European FTSEurofirst 300 index was up 0.4
percent to hit a five-year high, and posted a second straight
month of gains with a rise of 3.7 percent in October.
The MSCI world equity index dropped 0.4
percent, with its October gain above 4 percent.
U.S. Treasuries prices fell after the strong Midwest
business activity reading, which cut into pessimism that
fourth-quarter growth would be sub-par due to the federal
government partial shutdown during the first half of October.
Benchmark 10-year Treasury notes last traded
down 8/32 in price with a yield of 2.5542 percent. They were up
as much as 7/32 in price with a yield of 2.502 percent earlier.
CURRENCIES, COMMODITIES RATTLED
The euro fell the most in six months versus the
dollar, down 1 percent at $1.3592. The dollar index,
which measures the dollar against six major currencies, added
0.5 percent to trade above 80 for the first time in two weeks,
extending its five-day streak of gains to a total of 1.3
The euro was hurt further after the European Union's
statistics agency reported that inflation in the 17-country euro
zone unexpectedly dropped to a near four-year low in October and
unemployment stayed at a record high in September. German retail
and French consumer data also came in below par.
"We have had a nasty combination of a lack of inflationary
pressures and record unemployment, and the market's
interpretation is that the ECB may sit up and take notice," said
Jeremy Stretch, head of currency strategy at CIBC.
The dollar strength weighed in commodities markets. Spot
gold slumped 1.7 percent, the most in three weeks, while
spot silver lost 3.7 percent, the most in more than a
Brent crude fell 1.1 percent to $108.68 a barrel and
U.S. crude fell 0.4 percent to $96.35.