Strong data lifts dollar to 14-year high; oil falls

NEW YORK (Reuters) - The U.S. dollar touched a 14-year high and major stock markets got off to a solid start in the new year, boosted by strong data, while debt yields edged up after upbeat economic figures out of China and Europe.

Crude oil gave up a 2 percent advance and fell more than 2 percent, restrained by the strong dollar, as U.S. factory activity accelerated to a two-year high in December amid a surge in measures of new orders and employment.

Inflation rose in Germany and France, providing the euro zone’s central bank with evidence its loose monetary policy is working, while Chinese data showed the fastest factory output growth in six years.

On Wall Street, stocks rose, with all major indexes not far from their historic highs.

However, with the Dow Jones Industrial Average trading near the 20,000 mark, some investors warn that additional strong gains would be unlikely in the short term. They want to see evidence that President-elect Donald Trump’s campaign-trail promises will be approved by Republican lawmakers concerned about widening the federal budget deficit.

“The president-elect can’t just wave a magic wand,” said Warren West, principal at Greentree Brokerage Services in Philadelphia. “He has to deal with Congress, and Congress hasn’t proved to be able to agree with itself.”

The Dow .DJI rose 119.16 points, or 0.6 percent, to 19,881.76, the S&P 500 .SPX gained 19 points, or 0.85 percent, to 2,257.83 and the Nasdaq Composite .IXIC added 45.97 points, or 0.85 percent, to 5,429.08.

People walk through the lobby of the London Stock Exchange in London, Britain August 25, 2015. REUTERS/Suzanne Plunkett/File photo

The pan-European FTSEurofirst 300 index .FTEU3 rose 0.53 percent, while MSCI's gauge of stocks across the globe .MIWD00000PUS gained 0.33 percent.

Emerging market stocks rose 0.8 percent.

Earlier, MSCI's broadest index of Asia-Pacific shares outside Japan .MIAPJ0000PUS rose 0.5 percent.

The dollar index .DXY rose, boosted by the strong U.S. data and on continued bets that the Federal Reserve will have to raise rates this year to keep up with inflation and growth brought by a planned fiscal stimulus from the incoming Trump administration.

“Job growth appears to be picking up, orders are picking up quite strongly, prices are increasing quite strongly as well,” said Shaun Osborne, currency strategist at Scotia Capital in Toronto.

“That suggests the (Federal Reserve) is going to have to remain active in this kind of environment. So this on the whole is a generally constructive set of data for the dollar here in a time of the year where typically the dollar does quite well.”

The dollar index .DXY gained 1.05 percent. The euro fell 0.54 percent to $1.0401 and the pound dropped 0.35 percent to $1.2232.

Benchmark U.S. Treasury yields rose as traders sought risk, though they pared the advance as stocks fell from session highs and oil turned lower.

The 10-year U.S. Treasury yield hit a session high at 2.518 percent. Benchmark 10-year notes US10YT=RR last fell 5/32 in price to yield 2.4499 percent.

Oil prices fell after hitting an 18-month high, weighed down in part by the strong dollar. Traders said crude prices were buoyed earlier in the day by hopes that a deal between OPEC and other big oil exporters to cut production, which kicked in on Sunday, will drain a global supply glut.

“The dollar strength is certainly weighing on oil prices,” said Andrew Lipow, president of energy consulting firm Lipow Oil Associates in Houston.

U.S. crude CLc1 last fell 2.4 percent to $52.42 a barrel and Brent LCOc1 traded at $55.59, down 2.2 percent on the day.

Spot gold XAU= gained 0.0 percent to $1,159.12 an ounce. U.S. gold futures GCcv1 rose 0.7 percent to $1,159.80 an ounce.

Reporting by Rodrigo Campos, Dion Rabouin, Scott DiSavino and Gertrude Chavez-Dreyfuss in New York and Noel Randewich in San Francisco; Editing by Nick Zieminski and Dan Grebler