* Surprise contraction in Chicago PMI weighs on markets
* U.S. dollar falls as recovery hopes, quarter-end weigh
* Weak data brings shorter government debt back into vogue
* Oil tops $70 a barrel on U.S. gasoline inventory drop
(Updates with close of U.S. markets)
By Herbert Lash
NEW YORK, Sept 30 (Reuters) - The dollar slipped against
major currencies on Wednesday, pushing up crude oil, gold and
other commodity prices as investors took differing views on
weak U.S. economic data that cast doubt on a robust recovery.
An unexpected contraction in Midwest business activity and
larger private-sector layoffs than had been forecast sounded a
dour note for the end of a quarter in which stocks performed
strongly. For more see []
The Dow and S&P 500 both gained 15 percent in the third
quarter, and the Nasdaq climbed 15.7 percent. It was the Dow's
biggest quarterly gain since the fourth quarter of 1998.
For the day, the three major U.S. indexes fell, but MSCI's
all-country world index <.MIWD00000PUS> edged up 0.2 percent.
Oil surged nearly 6 percent to more than $70 a barrel,
buoyed by the weaker dollar and a drop in U.S. gasoline
inventories last week that hinted at rising demand in the
world's largest consumer. []
Currency markets shrugged off the manufacturing report and
took heart from a final reading of U.S. gross domestic product
in the second quarter, which fell at a slower rate than earlier
reported. Dismal economic data often spurs a safe-haven bid.
"Markets are still very optimistic," said Kathy Lien,
director of currency research at GFT Forex in New York. The
revised GDP figure "indicates that the United States is pretty
much emerging out of recession and there's a very good chance
we are going to see positive GDP growth in the third-quarter."
The dollar was down against a basket of major currencies,
with the U.S. Dollar Index <.DXY> down 0.49 percent at 76.745.
The euro <EUR=> was up 0.34 percent at $1.4632, and against
the yen, the dollar <JPY=> was down 0.36 percent at 89.77.
Stock losses were limited by a bounce in technology
bellwethers like Cisco Systems Inc <CSCO.O>, which gained 1
percent. The day's top drags were some of the quarter's best
performers, including industrials and banks.
The Dow Jones industrial average <> was down 29.92
points, or 0.31 percent, at 9,712.28. The Standard & Poor's 500
Index <.SPX> was down 3.53 points, or 0.33 percent, at
1,057.08. The Nasdaq Composite Index <> was down 1.62
points, or 0.08 percent, at 2,122.42.
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.
The data suggested the economy remains too weak to
withstand Federal Reserve interest rate hikes, leading
short-dated U.S. Treasuries to rise.
"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.
The 2-year U.S. Treasury note <US2YT=RR> was up 3/32 in
price to yield 0.95 percent, and the benchmark 10-year U.S.
Treasury note <US10YT=RR> was down 3/32 in price to yield 3.3
percent.
Gasoline demand over the past four weeks was up by more
than 5 percent, according to a weekly U.S. government report.
[]
U.S. crude futures <CLc1> settled up $3.90 at $70.61 a
barrel. London Brent crude <LCOc1> gained $3.13 to settle at
$69.07 a barrel.
Over the quarter, U.S. crude futures were up slightly from
the June 30 close of $69.89 a barrel.
European shares closed lower. The FTSEurofirst 300 <>
index of top European shares closed nearly 0.5 percent lower,
dragged down by banks and commodity stocks.
U.S. gold futures reclaimed $1,000 an ounce, ending 1.5
percent higher on a combination of a weaker dollar, crude oil
rally and simmering geopolitical tensions in the Middle East.
[]
The December gold contract <GCZ9> settled up $14.90 at
$1,009.30 an ounce in New York.
Copper closed the third quarter with a 24 percent gain as
the dollar's prolonged weakness, position squaring at the
quarter's end and ahead of a weeklong Chinese holiday helped
fuel a rally in the metal. []
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, Wanfeng Zhou, Edward McAllister
in New York; Kirsten Donovan, Dominic Lau and Ikuko Kurahone in
London; writing by Herbert Lash; Editing by Diane Craft)
