* Euro at 6-week high vs dollar
* Global equity markets trade lower
* Investors cautious as Fed policy-makers talk tapering
By Herbert Lash
NEW YORK, Dec 10 Global equity markets traded
slightly lower on Tuesday while the dollar and U.S. Treasury
yields eased on a growing view that the Federal Reserve will
need additional positive data before it decides to scale back
its economic stimulus.
The euro hit a six-week high against the dollar as traders
reconsidered whether the Fed would trim its monthly purchases of
$85 billion in bonds at its two-day meeting next week.
Even if the Fed were to signal a pullback in bond purchases,
policymakers will likely opt for a small one to prevent a bond
market sell-off, which would send long-term interest rates
higher and hurt the U.S. housing market.
"We might see a gradual tapering. The Fed won't let rates go
much higher," said Larry Milstein, head of government and agency
trading at R.W. Pressprich & Co. in New York.
At the same time, increased speculation that a banking union
with the power to close failing banks will be created in the
euro zone before the end of 2014 lifted the euro.
European Union finance ministers meeting in Brussels are
likely to take a step toward creating a banking union on
Tuesday, but leave nagging legal details to another time,
perhaps next week.
A banking union is widely viewed as crucial to shore up the
euro zone against future debt and financial crises.
"There's some expectation that a deal may be reached before
year-end, and that is supportive of the euro," said Sireen
Harajli, currency strategist at Mizuho Bank Ltd. in New York.
The euro gained for a sixth straight day versus the
greenback and was within sight of this year's high of $1.3832.
It last traded down 0.2 percent 1.3765.
The euro's rise caused the dollar index to extend
losses into a second straight day. It fell to six-week lows,
dragged down by lower U.S. Treasury yields, as
investors mostly downplay the prospect of a reduction in the
Fed's asset purchases this month.
The dollar index was down 0.19 percent at 79.982
The 10-year Treasury note was 12/32 higher in price to yield
European shares slipped, weighed down by major Swiss stocks
as a rally in the Swiss franc raised fresh concern about
the country's exports.
The pan-European FTSEurofirst 300 index closed down
0.74 percent at 1,262.98.
The Dow Jones industrial average fell 29.64 points,
or 0.18 percent, at 15,995.89. The Standard & Poor's 500 Index
was down 3.47 points, or 0.19 percent, at 1,804.90. The
Nasdaq Composite Index was down 4.17 points, or 0.10
percent, at 4,064.58.
Brent crude for January was down 21 cents at $109.18
a barrel. Brent dropped 2 percent on Monday, its biggest loss in
But U.S. crude oil was higher on news of progress
toward the opening of a major pipeline that will transport oil
from the U.S. Midwest to the Gulf, helping drain surplus crude
at the pricing point for the futures contract.
U.S. light crude futures for January were up 96 cents at
$98.30 a barrel.