* Surprise contraction in Chicago PMI weighs on markets
* U.S. dollar pressured by weaker data; Swiss franc falls
* Longer-term government debt prices rise on weak data
* Oil tops $69 a barrel on U.S. gasoline inventory drop
(Updates with U.S. markets activity, changes byline, dateline;
previous LONDON)
By Herbert Lash
NEW YORK, Sept 30 (Reuters) - The dollar weakened against
most major currencies, pushing up crude oil, gold and other
commodity prices on Wednesday, after patchy U.S. manufacturing
data pointed to a slow road to recovery for the U.S. economy.
An unexpected contraction in Midwest business activity
sounded a dour note for the end of a strong quarter for stocks,
but oil rose above $69 per barrel, buoyed by a drop in U.S.
gasoline inventories and a weaker dollar. For more see
[].
The weak U.S. data pushed longer-dated euro zone bond
yields to five-month lows but U.S. government debt traded near
break-even after U.S. equity markets rebounded to turn higher
after midday.
A report showing a steeper-than-expected loss in
private-sector U.S. jobs in September reinforced the notion
that U.S. consumer spending will remain sluggish even as the
economy emerges from the worst downtown since the 1930s.
"I'm not a believer yet that this is a robust economy,"
said Robert MacIntosh, chief economist at Eaton Vance Corp in
Boston. "What it comes down to is how much of this recovery is
going to be sustainable."
MacIntosh said one question mark is whether businesses will
ramp up production and spur jobs. Without those elements,
consumption will remain weak and hamper economic growth.
Before 1:30 p.m. (1730 GMT), the Dow Jones industrial
average <> was up 16.40 points, or 0.17 percent, at
9,758.60. The Standard & Poor's 500 Index <.SPX> was up 0.70
points, or 0.07 percent, at 1,061.31. The Nasdaq Composite
Index <> was up 8.88 points, or 0.42 percent, at
2,132.92.
European shares closed lower after the drop in the U.S.
business barometer of the Institute for Supply
Management-Chicago, which fell to 46.1 from 50.0 in August.
The FTSEurofirst 300 <> index of top European shares
closed nearly 0.5 percent lower, dragged down by banks and
commodity stocks.
"The inclination is not to read too much into the latest
(Chicago) report," said Alan Ruskin, chief international
strategist at RBS Global Banking and Markets in Stamford,
Connecticut, citing the report's erratic nature.
"Nonetheless, this is a further warning shot that even a
modest recovery will not be smooth sailing and is going to
reinforce the equity slippage today."
The Swiss franc fell against the euro and the dollar, with
traders citing talk the Swiss National Bank may have intervened
to weaken its country's currency. The SNB declined to comment
on the franc's price action. []
"Net-net, people are selling dollars although we don't know
how long it would remain weak," said John McCarthy, director of
foreign exchange at ING Capital Markets in New York.
The dollar was down against a basket of major currencies,
with the U.S. Dollar Index <.DXY> down 0.60 percent at 76.663.
The euro <EUR=> was up 0.42 percent at $1.4644, and against
the yen, the dollar <JPY=> was down 0.46 percent at 89.68 yen.
The weak manufacturing data reinforced expectations that
the U.S. Federal Reserve will refrain from raising interest
rates any time soon.
The benchmark 10-year U.S. Treasury note <US10YT=RR> was
down 8/32 in price to yield 3.32 percent.
U.S. government weekly oil data showed a 1.6 million barrel
drop in gasoline inventories, in line with separate figures
from the American Petroleum Institute industry group but
contrary to analysts' forecast for an increase.
Gasoline demand over the past four weeks rose more than 5
percent. [] []
U.S. light sweet crude oil <CLc1> rose $2.89, or 4.33
percent, to $69.60 per barrel.
Copper rose to a one-week high and gold rallied above the
$1,000-an-ounce mark, as dollar weakness helped the metal stay
on track for its best quarterly performance since early 2008.
[] []
Spot gold <XAU=> rose $16.40 to $1,007.60 in New York.
Japan's Nikkei average <> edged up 0.3 percent in
cautious trade, while the MSCI index of Asia Pacific stocks
traded outside Japan <.MIAPJ0000PUS> was up about 0.7 percent
and was set to post a second straight quarterly gain.
(Reporting by Ryan Vlastelica and Gertrude Chavez in New York
and Kirsten Donovan, Dominic Lau and Ikuko Kurahone in London;
Writing by Herbert Lash; Editing by James Dalgleish)
