* Investors uncertain about extent of Fed asset-buying
* U.S. Treasuries weighed by rise in consumer sentiment
* Stocks weakened by lackluster earnings, outlooks
(Updates with U.S. markets' open, changes byline, dateline,
previous: LONDON)
By Manuela Badawy
NEW YORK, Oct 26 (Reuters) - The dollar rose broadly on
Tuesday as investors reassessed the likely amount of the
Federal Reserve's asset-buying and scaled back their bets
against the U.S. currency, while stocks zigzagged on lackluster
earnings.
U.S. government debt prices fell after a consumer
confidence index for October came in higher than expected, but
the gauge was still near historically low levels as concerns
about the labor market persisted. For details, see
[]
The market expects the Fed to opt for more quantitative
easing next week, but some easing is seen priced into an
already weak dollar. How much easing the Fed decides on and how
gradually it will implement is uncertain, keeping investors
edgy about building more bearish bets on the dollar.
QE essentially involves printing more money, so a flood of
dollars on the market would debase the currency's value.
"Everything is dependent on the FOMC (Federal Open Market
Committee) and people don't want to take aggressive positions
ahead of this very big decision," said Stephan Maier, currency
strategist at Unicredit in Milan.
But some investors have begun to reconsider the likelihood
of a big burst of QE after comments from some Fed officials
late Monday.
Kansas City Fed President Thomas Hoenig called more asset
purchases by the central bank a "very dangerous gamble." New
York Fed President William Dudley said the U.S. economic
context would determine whether an incremental or sizable
approach to asset purchases was better.
"I think it's still possible that QE II is not a done deal
for November, even though the market has been trading as if it
is," said Brian Dolan, chief currency strategist at Forex.com
in Bedminster, New Jersey.
"This is one of the last bullets the Fed has in its gun and
it's going to be very reluctant to fire it unless circumstances
are really dire. It might be put off until the first quarter. I
think the market has started to consider that this week."
The dollar was up against a basket of major currencies,
with the U.S. Dollar Index <.DXY> climbing 0.52 percent at
77.502 from a previous session close of 77.103.
The euro <EUR=> was down 0.55 percent at $1.3886 from a
previous session close of $1.3963. Against the Japanese yen,
the dollar <JPY=> was up 0.57 percent at 81.24 from a previous
session close of 80.780, edging away from 15-year lows after
Japan's finance minister Yoshihiko Noda warned the government
would "act decisively" in currency markets if needed.
[]
STOCKS TURN WEAKER
U.S. stocks were lower a day after hitting a
five-and-a-half month high. Data showed consumer confidence
rose slightly in October but remained near historically low
levels as concerns about the labor market persisted.
Corporate results from the materials and technology sector
were lackluster. The materials sector led the way down on soft
commodity prices and disappointing outlooks from steel makers,
including United States Steel Corp <X.N>.
The Dow Jones industrial average <> was down 1.52
points, or 0.01 percent, at 11,162.53. The Standard & Poor's
500 Index <.SPX> was down 0.98 points, or 0.08 percent, at
1,184.64. The Nasdaq Composite Index <> was up 1.27
points, or 0.05 percent, at 2,492.12.
Texas Instruments Inc <TXN.N> lost 1.6 percent to $28.52 a
day after it warned that fourth-quarter revenue will be hurt by
slowing demand. []
Equities and the dollar have formed an inverse relationship
exacerbated by expectations the U.S. Federal Reserve will
embark on another round of economic stimulus.
MSCI's all-country world stock index <.MIWD00000PUS> was
down 0.48 percent with its emerging market sub-index <.MSCIEF>
sustaining a small loss.
The pan-European FTSEurofirst 300 <> index of top
shares was down 0.2 percent at 1,090.00 points, after rising
0.3 percent on Monday to end near a six-month high.
European equities fell on both uncertainty about QE and
comments from ArcelorMittal <ISPA.AS> that the basic resources
sector faced extended weakness.
"We had a rally since August and now people are waiting to
see whether this quantitative easing is going to come through
or not. There are still some uncertainties and the market is
going to be rangebound until the meeting of the Fed," said Koen
De Leus, strategist at KBC Securities, in Brussels.
The Fed meets next on Nov. 2-3.
Earlier, Japan's Nikkei <> closed down 0.3 percent,
with exporters still in focus because of the strong yen.
U.S. government debt fell on data showing
higher-than-expected consumer confidence and as traders cut
prices ahead of supply .
The benchmark 10-year U.S. Treasury note <US10YT=RR> was
down 10/32, with the yield at 2.603 percent. The 2-year U.S.
Treasury note <US2YT=RR> was down 2/32, with the yield at
0.3872 percent. The 30-year U.S. Treasury bond <US30YT=RR> was
down 21/32, with the yield at 3.9528 percent.
In energy and commodities, crude oil <CLc1> rose 0.19
percent to $82.68 per barrel while spot gold <XAU=> fell $3.70,
to $1335.70 an ounce.
(Additional reporting by Ellen Freilich, Nick Olivari, and
Leah Schnurr in New York and Jeremy Gaunt in London; Editing by
Kenneth Barry)
