* Chinese rate rise puts pressure on global shares
* Blizzard in northeast U.S. limits U.S. trade
* Oil prices come off 26-month high after China move.
(Updates with U.S. market open, adds comment, background,
changes dateline, byline)
By Daniel Bases
NEW YORK, Dec 27 (Reuters) - China's Christmas Day interest
rate rise and a severe blizzard that blanketed the northeastern
United States left U.S. share prices weak and the U.S. dollar
lower in thin markets on Monday.
European stock markets fell in response to China's move,
although with the UK on holiday until Wednesday, trading
activity was limited even more.
Stocks and commodities, while weak on Monday, hovered just
underneath better than two year highs.
China's rate increase on Dec. 25 is the second in just over
two months and represents the central bank's stepped up efforts
to slow the pace of rising inflation. []
The euro rose to its best levels in a week against the
greenback, although oil prices pulled back from 26-month highs
in light of China's rate move which countered the influence of
severe cold weather in the United States and Europe.
Tighter Chinese monetary policy, which theoretically would
slow the pace of economic growth, is being felt far and wide
given the nation's growing influence in commodity markets as
well as development in emerging markets.
It also fills a void left by struggling developed markets
whose sub-trend economic growth is expected to linger due to
the ongoing debt crisis.
"In the long run, this is going to be healthy for the
Chinese economy, but the instinctive market reaction is that
this is going to be bad for global demand, giving investors a
reason to sell off equities," said Quincy Krosby, market
strategist with Prudential Financial in Newark, New Jersey.
In mid-morning New York trade, the Dow Jones industrial
average <> fell 28.91 points, or 0.25 percent, to
11,544.58. The Standard & Poor's 500 Index <.SPX> lost 2.42
points, or 0.19 percent, to 1,254.35. The Nasdaq Composite
Index <> dropped 14.38 points, or 0.54 percent, to
2,651.22.
In Europe, the FTSEurofirst 300 <> ended 0.8 percent
lower at 1,137.80.
Chinese shares traded in Shanghai fell 1.9 percent,
although elsewhere in Asia, markets bucked the downward trend.
The MSCI index of Asian stocks outside Japan
<.MIAPJ0000PUS> rose 0.02 percent with Japan's Nikkei <>
closing up 0.75 percent, extending its recent outperformance in
Asia.
The MSCI All Country World index <.MIWD00000PUS> dipped 0.2
percent while the Thomson Reuters global stock index
<.TRXFLDGLPU> lost 0.27 percent.
China's central bank said on Saturday it would raise the
benchmark lending rate by 25 basis points to 5.81 percent and
lift the benchmark deposit rate by 25 basis points to 2.75
percent.
On Monday the PBOC took aim at inflation once again by
saying prudent monetary policy would be helpful in combating
price pressures and asset bubbles. []
EURO GAINS
The normally thin post-holiday market was made even more so
by a severe blizzard that shut down some commuter transport
networks, making New York trading desks operate on skeletal
staffing.
The euro rose after shaking off losses below its 200-day
moving average -- $1.3087, according to Reuters data.
A move below that level is usually indicative of more
losses. While fears that a euro zone debt crisis could spread
have pushed the euro below the 200-day moving average in five
of the last six sessions, it has rebounded swiftly each time.
It was last up 0.30 percent at $1.3154 <EUR=>.
"With no economic news, we're focusing on these technical
factors, and that push above the 200-day average has been a
catalyst for the euro," said Omer Esiner, strategist at
Commonwealth Foreign Exchange in Washington. "And with London
off and the blizzard in New York, things are very subdued."
The dollar traded flat against the yen at 82.85 <JPY=>,
after dropping to a three week low in Asian trading hours.
The Australian dollar fell as low as $0.9987, though it had
clawed back to $1.0025 <AUD=>, nearly flat on the day. The
currency hit a six-week high of $1.0067 last week.
U.S. Treasuries were marginally weaker ahead of the auction
of $35 billion in two-year notes at 1 p.m. (1800 GMT). The U.S.
Treasury said the auction, along with sales of three-month and
six-month bills, would proceed as planned despite the snow.
[].
Benchmark 10-year notes fell 7/32 of a point in price,
pushing the yield up to 3.42 percent <US10YT=RR>.
U.S. light sweet crude oil <CLc1> fell 49 cents, or 0.54
percent, to $91.02 per barrel, and spot gold prices <XAU=> fell
$1.95, or 0.14 percent, to $1382.30.
(Additional reporting by Steven C. Johnson, Angela Moon, Mike
Peacock, Editing by Chizu Nomiyama)
