* Dollar rebounds, still set for big weekly loss after Fed
* Bond prices flat as investors mull impact of Fed program
* Oil at $52, recoups losses after shipping lane collision
(Recasts with U.S. markets, changes dateline; previous
LONDON)
By Herbert Lash
NEW YORK, March 20 (Reuters) - The U.S. dollar rebounded
broadly on Friday from a slide sparked by the Federal Reserve's
move to buy up to $300 billion of government debt and U.S.
stocks slipped on the tepid debut of a Fed measure to revive
lending.
While U.S. stocks and Treasuries slipped, in Europe stocks
and government debt prices rose as investors still mulled the
potential impact of the Fed's plan announced on Wednesday to
pump an additional $1 trillion into the flagging U.S. economy.
Gold edged down as the dollar rebounded against the euro,
prompting profit taking, and a two-day rally in commodity
markets cooled as investors worried about demand.
Oil hovered above a four-month high at $52 a barrel,
recouping earlier losses as the market sought a new base after
news of a collision in the key Strait of Hormuz shipping lane
near Iran.
The euro reversed earlier gains with sentiment undermined
slightly by uncertainty over a European plan to rescue weaker
euro zone members, and data showing a plunge in industrial
output. For details, see [].
But the single European currency was still on track for its
biggest ever weekly percentage gain against the dollar, despite
hefty profit-taking following its recent run-up.
The euro <EUR=> was down 0.78 percent at $1.3556.
U.S. stocks fell on tumbling bank shares but European
shares closed higher in a choppy session as Bayer <BAYG.DE>
gained after it received a green light for a key drug.
"The market is see-sawing today. What we have seen here is
investors downsizing their positions, taking half of their
profits out but still leaving some positions in," said Joshua
Raymond, market strategist at City Index.
"Investors are still fairly confident that the market could
go higher, but yet again they do not want to take the risk in
case the market turns. ... There are still concerns about bank
liquidity and return on investment," added Raymond.
JPMorgan <JPM.N> dropped more than 4 percent, making the
stock one of the top drags on the Dow, while Bank of America
<BAC.N> plummeted 11 percent.
The Fed's long-awaited program to revive consumer and small
business lending, the Term Asset-Backed Securities Loan
Facility, got off to a stuttering start on Thursday as
investors largely stayed away [].
After 1 p.m., The Dow Jones industrial average <> fell
62.93 points, or 0.85 percent, at 7,337.87. The Standard &
Poor's 500 Index <.SPX> shed 10.27 points, or 1.31 percent, at
773.77. The Nasdaq Composite Index <> slipped 22.15
points, or 1.49 percent, at 1,461.33.
In Europe, Bayer <BAYG.DE> jumped 11.3 percent after a U.S.
panel gave a green light for Bayer's new blood-clot drug
Xarelto, putting it on track to win approval in its largest
market[].
The pan-European FTSEurofirst 300 index <> of top
shares rose 0.4 percent at 717.88 points.
Euro zone government bonds rose, extending a rally sparked
by gains in U.S. Treasuries after the Fed announced its plans
to buy up to $300 billion in U.S. government debt.
But U.S. Treasury debt prices barely budged as investors
paused after the Fed plan set benchmark yields on track for
their biggest weekly drop this year.
The benchmark 10-year U.S. Treasury note <US10YT=RR> fell
2/32 in price to yield 2.62 percent. The 2-year U.S. Treasury
note <US2YT=RR> was unchanged in price to yield 0.87 percent.
U.S. light sweet crude oil <CLc1> pared gains to fall 39
cents to $51.22 per barrel after a nuclear-powered U.S.
submarine and another U.S. vessel collided in the Strait of
Hormuz bordering Iran. There was no damage to the atomic
propulsion unit, the U.S. Navy said [].
"The sentiment that the economy may improve and that the
Fed's moves may be inflationary has crude trying to put in a
base above $50 after breaking out of its recent range," said
Gene McGillian, an analyst at Tradition Energy in Connecticut.
Gold fell on profit-taking after its rally to a three-week
high earlier in the session. But prices are firmly underpinned
by interest in the metal as a haven from inflation and broad
dollar weakness in the wake of the Fed's move.
"The past two days' worth of upside puts us back in bullish
territory," said Alan Plaugmann, head of futures and options at
Saxo Bank.
Spot gold prices <XAU=> fell 75 cents to $957.85 an ounce.
Tokyo markets were closed for a public holiday. The MSCI
index of Asia-Pacific stocks outside Japan <.MIAPJ0000PUS> lost
1 percent.
(Reporting by Ellis Mnyandu, Vivianne Rodrigues, Chris Reese
and Barani Krishnan in New York, Joanne Frearson, George
Matlock, Chris Baldwin, Jan Harvey in London; writing by Ellis
Mnyandu, Vivianne Rodrigues, Chris Reese and Barani Krishnan in
New York, Joanne Frearson, George Matlock, Chris Baldwin, Jan
Harvey in London; Writing by Herbert Lash; Editing by Leslie
Adler)
