* U.S. stocks end mixed, European stocks hit 6-year low
* Oil gains 6 pct on growing signs of OPEC production cuts
* Longer-dated government bonds slammed by supply worries
* Dollar climbs to 23-year high vs sterling amid weak data
(Adds close of U.S. markets)
By Herbert Lash
NEW YORK, Jan 23 (Reuters) - Strong Google results and a
rally in financials helped lift two key U.S. stock indices on
Friday even as dismal economic news pushed European shares to a
six-year low and gold rose 5 percent in a flight to safety.
Despite a rise in the benchmark S&P 500 and technology-rich
Nasdaq indexes, the economic outlook remained grim. The dollar
rose to a six-week high against the euro and a 23-year peak
against the British pound as investors took refuge in the U.S.
currency.
General Electric Co's <GE.N> warning of an "extremely
difficult" 2009 put a damper on the Dow, while gold hit
all-time highs when priced in the euro and the pound.
Longer-dated U.S. Treasuries fell for a fifth straight day
as investors fretted about the impact of large amounts of new
debt to fund the country's economic rescue plans.
JPMorgan Chase <JPM.N> and Citigroup <C.N> led a rebound in
financials. Some analysts cited talk of further government cash
injections for banks, while others said investors were tempted
by stocks beaten down in this week's sell-off.
"There is some chatter circulating out there about the
possibility of a new effort from the new administration to help
supplement capital bases in the banking sector," said Craig
Peckham, equity trading strategist at Jefferies & Co in New
York.
U.S. stock declines were fueled by worries of how 2009 will
fare. GE fell 10.8 percent on its outlook, while investors also
worried about a possible dividend cut despite reassuring
comments by the company's chief executive, Jeff Immelt.
"On average, companies are saying they expect a very, very
challenging year and that's part of what's causing the
problem," said Paul Mendelsohn, chief investment strategist at
Windham Financial Services in Charlotte, Vermont.
The Dow Jones industrial average <> fell 45.24 points,
or 0.56 percent, to 8,077.56. The Standard & Poor's 500 Index
<.SPX> rose 4.45 points, or 0.54 percent, to 831.95. The Nasdaq
Composite Index <> added 11.80 points, or 0.81 percent, to
finish at 1,477.29.
With no major U.S. data scheduled, investors took their cue
from dismal data coming out of Europe.
The British economy entered recession for the first time
since 1991, Spanish unemployment surged to a nine-year high,
and euro zone services and manufacturing activity shrank in
January, albeit at a slower pace -- but still recessionary.
"Sentiment is very fragile," said Darren Winder, strategist
at brokerage Cazenove.
The pan-European FTSEurofirst 300 <> index of top
European shares ended down 0.3 percent at 760.54 points, its
lowest close since April 2003. The close was slightly lower
than a previous low set on Nov. 21.
Insurers were in the doldrums. Swiss Re <RUKN.VX> lost 19.2
percent on worries it could make further write-downs when it
reports full-year results on Feb. 19.
European banks also fell, with BNP Paribas <BNPP.PA> off
7.8 percent, the second-biggest drag on the FTSEuropefirst 300,
while Axa <AXAF.PA>, the biggest drag, fell 6.7 percent.
Gloomy economic data underpinned shorter-term debt in
Europe as investors bet on further interest rate cuts by the
European Central Bank. The two-year euro zone government bond
yield plumbed to a record low of 1.348 percent at one point.
It was primarily fears over the impact of U.S. government
debt issuance that dragged 30-year bond prices down and yields
up to the highest since early December.
"The government will be issuing a tremendous amount of
debt. You are also having a flight into high-quality corporate
bonds," which is drawing some flows away from government debt,
said Roy Williams, chief executive of Prestige Wealth
Management Group in Pennington, New Jersey.
The yield on the 30-year U.S. Treasury bond, which moves
inversely to its price, had its biggest weekly jump since
November 2001 due to concerns over pending supply.
The benchmark 10-year U.S. Treasury note <US10YT=RR> fell
4/32 in price to yield 2.61 percent. The 30-year U.S. Treasury
bond <US30YT=RR> fell 36/32 in price to yield 3.32 percent.
Oil prices rose more than 6 percent on mounting evidence
that the Organization of Petroleum Exporting Countries is
complying with the bulk of its record output cuts.
U.S. crude <CLc1> settled up $2.80 at $46.47 a barrel,
while London Brent <LCOc1> traded up $2.98 at $48.37 a barrel.
The gains came after oil consultant Petrologistics
estimated OPEC production would fall by 1.55 million barrels
per day in January as part of the cartel's efforts to meet a
2.2 million bpd reduction agreed in December.
Gold rallied, briefly breaking above the $900-an-ounce
level, as volatile currency markets and solid investment demand
spurred bullion buying.
"I think that people are coming to the new year realizing
that the financial crisis is going to last longer than they had
expected," said Caesar Bryan, portfolio manager of GAMCO Gold
Fund.
Spot gold <XAU=> rose as high as $902.50 an ounce, the
loftiest price since Oct. 10.
The MSCI index of Asia-Pacific stocks outside Japan
<.MIAPJ0000PUS> fell 2.4 percent to the lowest since Dec. 5,
while Japan's Nikkei share average <> finished at a
two-month low, down 3.8 percent.
(Reporting by Leah Schnurr, Nick Olivari and Chris Reese in
New York and Ian Chua, Phakamisa Ndzamela, Jane Merriman,
Joanne Frearson and Jan Harvey in London; writing by Herbert
Lash; Editing by Jonathan Oatis)
