* Dollar sinks to 6-month low vs euro on Dudley comments
* Oil jumps to $81 on weak dollar, Chinese manufacturing
* Bond prices fall on improved U.S. income, spending data
* Gold hits $1,320.80 an ounce as dollar slips
(Updates with close of European markets)
By Herbert Lash
NEW YORK, Oct 1 (Reuters) - The U.S. dollar hit a six-month
low versus the euro and global stocks trimmed gains on Friday
on signs of slower U.S. manufacturing growth and after Federal
Reserve officials said more must be done to lift the economy.
Crude oil jumped on strong Chinese manufacturing data and
gold prices hit a record high for a sixth successive session as
expectations mounted that the Fed will boost money supply after
comments by William Dudley, president of the New York Fed. For
details, see [] []
The dollar, oil and U.S. stocks pared gains after a report
from the Institute for Supply Management showed growth in the
U.S. manufacturing sector slowed in September and inflation
remained subdued -- key elements the Fed is closely watching.
Treasury losses deepened on the ISM data, which showed
factory activity holding up better than the rest of the
economy, but the data indicated new orders are losing steam.
Chicago Federal Reserve Bank President Charles Evans later
said more easing was "desirable" and framed the debate over
further easing by the Fed as one of "how much" and "how,"
rather than whether steps should be taken. []
Dudley said that current conditions of high unemployment
and low inflation are "unacceptable," suggesting another round
of quantitative easing may be in the works.
"The Fed has only provided statements that the market
should expect QE2. The only question is how much," said Todd
Schoenberger, managing director at Landcolt Trading Inc in
Austin, Texas.
MSCI's all-country world equity index <.MIWD00000PUS> was
up 0.4 percent, but the pan-European FTSEurofirst 300 <>
closed down 0.3 percent and U.S. indexes were little changed.
Before 1 p.m., the Dow Jones industrial average <> was
up 25.81 points, or 0.24 percent, at 10,813.86. The Standard &
Poor's 500 Index <.SPX> was up 1.96 points, or 0.17 percent, at
1,143.16. The Nasdaq Composite Index <> was down 2.46
points, or 0.10 percent, at 2,366.16.
European shares fell after the ISM report showed growth in
the U.S. manufacturing sector slowed in September, and on
nervousness ahead of the U.S. corporate earnings season.
[]
"We are seeing profit-taking for the week. The (U.S.)
corporate reporting season starts next week and there is some
uncertainty in the market because nobody really knows how that
is going to go," said Oliver Roth, head trader at Close
Brothers Seydler Bank in Frankfurt.
Oil rose above $81 a barrel to a seven-week high, boosted
by the weak dollar and the strong Chinese factory activity.
[]
Copper prices rose to their highest in more than two years
on the manufacturing data from China. [] Copper
touched $8,178 a tonne on the London Metal Exchange, a gain of
about 35 percent since early June and its highest since July
2008.
The dollar was down against major currencies, with the U.S.
Dollar Index <.DXY> down 0.62 percent at 78.232. The euro
<EUR=> was up 0.84 percent at $1.3744, and against the Japanese
yen, the dollar <JPY=> was down 0.12 percent at 83.35.
Treasury prices fell on stronger-than-expected data on
spending and income in spite of Dudley's remarks about more
Federal Reserve support for the economy. []
The benchmark 10-year U.S. Treasury note <US10YT=RR> was
down 5/32 in price to yield 2.53 percent.
The MSCI index of Asia Pacific stocks outside Japan
<.MIAPJ0000PUS> was up 0.7 percent on the Chinese manufacturing
data. Japan's Nikkei <> average closed up 0.37 percent.
(Reporting by Edward Krudy, Gertrude Chavez-Dreyfuss in New
York; Marie-Louise Gumuchian, Harpreet Bhal and Jan Harvey in
London; Writing by Herbert Lash; Editing by Kenneth Barry)
