NEW YORK (Reuters) - The dollar hit a six-month low versus the euro but global stocks edged higher on Friday after Federal Reserve officials said more must be done to lift the slow-growing U.S. economy.
Crude oil jumped on strong Chinese manufacturing data and gold hit a record high for a sixth consecutive session as expectations mounted in bond, commodity and currency markets that the Fed will boost money supply to boost growth.
Two Fed policymakers said on Friday that more action would likely be needed unless the economic outlook improves. But in a reflection of fundamental differences among officials, another regional Fed chief said the debate is not over.
The dollar, oil and U.S. stocks pared gains after a report from the Institute for Supply Management showed growth in U.S. manufacturing slowed in September and inflation remained subdued -- key elements in the debate over monetary easing.
Wall Street rose, led by gains in resource stocks on news of strong Chinese manufacturing, but the advance was tempered by U.S. data suggesting slower U.S. factory activity growth.
“We have had some good news today, especially from China, that prompted a rally in Europe and was carried through the U.S.,” said Stephen Massocca, managing director at Wedbush Morgan in San Francisco, referring to equity markets.
MSCI’s all-country world equity index .MIWD00000PUS was up 0.5 percent, pushed by 1 percent rise in emerging markets.
The Dow Jones industrial average .DJI ended up 41.63 points, or 0.39 percent, at 10,829.68. The Standard & Poor's 500 Index .SPX was up 5.04 points, or 0.44 percent, at 1,146.24. The Nasdaq Composite Index .IXIC was down 2.13 points, or 0.09 percent, at 2,370.75.
Many analysts expect the Fed to start a new round of bond purchases should it try to boost economic growth. Such a move would push down yields on government debt, make the dollar less attractive and lift assets prices because of inflation fears.
Gold rose nearly 1 percent on expectations of further monetary easing.
“What you are seeing is anticipation of the Fed coming down with another round of quantitative easing. The question at this point is what’s the size of it,” said Zachary Oxman, managing director at TrendMax Futures.
“I would look at November, December for the next phase of monetizing all the debt that we put out there,” Oxman said.
Spot gold scaled an all-time high of $1,320.80 an ounce. U.S. gold futures for December delivery settled up $8.20 at $1,317.80.
Oil prices rose 2 percent as the dollar slumped on heightened expectations there will be more monetary easing.
U.S. crude for November delivery rose $1.61 to settle at $81.58 a barrel.
ICE Brent November crude rose $1.44 to settle at $83.75 a barrel.
“The dollar weakness and the belief there will be more quantitative easing by the Federal Reserve are pushing (crude oil) prices up,” said Gene McGillian, an analyst at Tradition Energy in Stamford, Connecticut.
U.S. Treasuries slipped as bonds succumbed to investors shifting money into stocks after Wall Street posted its best quarter in a year and on growth in manufacturing.
The benchmark 10-year U.S. Treasury note was down 1/32 in price to yield 2.51 percent.
Copper rose to its highest level in more than two years after the Chinese data reinforced a healthier demand outlook from the world’s largest consumer of industrial metals.
The dollar was down against major currencies, with the U.S. Dollar Index .DXY down 0.86 percent at 78.044. The euro was up 1.17 percent at $1.3789, and against the Japanese yen, the dollar was down 0.24 percent at 83.25.
The MSCI index of Asia Pacific stocks outside Japan .MIAPJ0000PUS was up 0.7 percent on the Chinese manufacturing data. Japan's Nikkei .N225 average closed up 0.37 percent.
Reporting by Angela Moon, Vivianne Rodrigues, Richard Leong, Robert Gibbons and Frank Tang in New York; Writing by Herbert Lash; Editing by Kenneth Barry