* Stocks slip as Bernanke frets about high unemployment
* U.S. dollar slips vs euro on Bernanke, rate outlook
* Government debt rallies as 10-year note sale gets love
* Brent rises on Egypt, dollar; US oil down on stockpiles
(Adds close of U.S. markets)
By Herbert Lash
NEW YORK, Feb 9 (Reuters) - Emerging market stocks sold off
on Wednesday as investors fretted about inflation in the
developing world while the U.S. dollar fell after remarks by
Federal Reserve Chairman Ben Bernanke pushed bond yields down.
The dollar fell against the euro after a strong auction of
U.S. Treasury debt accelerated bearish sentiment in the wake of
Bernanke's comments, which indicated the U.S. central bank's
$600 billion bond-buying program remains intact. For details
see: []
"Bernanke is telling you that the Fed is not going to rush
to raise rates, and that's why the dollar sold off," said David
Woo, head of global rates and currencies research at Bank of
America Merrill Lynch in New York.
The euro <EUR=> gained 0.72 percent at $1.3731, and the
U.S. Dollar Index <.DXY>, a basket of major currencies, was
down 0.52 percent.
Investors embraced government bonds, drawn by higher yields
and encouraged by a 10-year U.S. Treasury note auction that
apparently attracted record foreign demand. []
The so-called indirect bid, which roughly correlates to
demand from overseas investors, dominated the auction, taking
71.3 percent of the sale. The norm is about 44 percent, said
Ian Lyngen, senior government bond strategist at CRT Capital
Group in Stamford, Connecticut.
The benchmark 10-year U.S. Treasury note <US10YT=RR> rose
20/32 in price to yield 3.66 percent.
Stocks in Tokyo were poised to open lower, with the March
futures contract that trades in Chicago for the Nikkei 225
<0#NK:> down 65 points at 10,630.
Investors dumped emerging market shares after Brazil said
it will cut 50 billion reais ($30 billion) from its budget this
year to slow surging inflation and an overheated economy. For
details see: []
The announcement came on the heels of China's raising of
interest rates on Tuesday to subdue stubbornly high inflation
and curb its fast-expanding economy. <nTOE706030>
MSCI's emerging market index fell 1.5 percent, led by a 2.4
percent decline in Brazil's benchmark Bovespa index <>
Since the emerging market index peaked in mid-January at highs
last seen in June 2008, it has declined more than 5 percent.
The slide in developing world assets contrasted with U.S.
stocks, where the tech-rich Nasdaq and broad S&P 500 index
fell. But the iconic Dow industrials eked out an eighth
straight session of gains, lifted by a late-hour rally in Bank
of America <BAC.N>
MSCI's all-country world index <.MIWD00000PUS> is up about
4 percent so far this year, while the S&P 500 has gained about
5 percent since the beginning of 2011.
Investors expressed confidence that solid corporate
earnings will spur further U.S. stock advances, but a recent
string of lightly traded sessions raised worries that buying
interest at these levels has dried up.
"We've had such a great run that we're seeing some
profit-taking even though there's really no information out
there that's taking us down," said Tom Wirth, senior investment
officer for Chemung Canal Trust Co, which manages $1.5 billion
in Elmira, New York.
The Dow Jones industrial average <> closed up 6.74
points, or 0.06 percent, at 12,239.89. The Standard & Poor's
500 Index <.SPX> fell 3.69 points, or 0.28 percent, at
1,320.88. The Nasdaq Composite Index <> slipped 7.98
points, or 0.29 percent, at 2,789.07.
Dow components Walt Disney Co <DIS.N> and Coca-Cola Co
<KO.N> advanced after reporting strong quarterly sales. Disney
was the strongest performer on the index, surging 5.3 percent
to $43.36 and Coke gained 0.4 percent to $63.15. For details,
see [] and []
Brent crude jumped nearly 2 percent to near $102 a barrel
as the dollar fell and unrest in Egypt stoked supply worries,
while high inventories pushed down U.S. crude and widened the
spread between the two contracts to record levels.
The U.S. inventory builds helped push Brent's premium over
the U.S. crude futures to a record above $15 a barrel,
surpassing the previous high of $13.06 on Tuesday.<CL-LCO1=R>
In London, ICE March Brent <LCOH1> settled $1.90 higher at
$101.82 a barrel.
U.S. crude for March delivery <CLH1> ended 23 cents lower
at $86.71 a barrel.
Gold was little changed as the market was underpinned by
the dollar's drop and Bernanke's comment on bond-buying and the
indication that rates will not rise any time soon.
[]
U.S. gold futures for April delivery <GCJ1> settled up
$1.40 at $1,365.50.
(To read Reuters Global Investing Blog click on
http://blogs.reuters.com/globalinvesting; for the MacroScope
Blog click on http://blogs.reuters.com/macroscope; for Hedge
Fund Blog click on http://blogs.reuters.com/hedgehub)
(Reporting by Ryan Vlastelica, Julie Haviv, Gene Ramos, Ellen
Freilich and Frank Tang in New York; Writing by Herbert Lash;
Editing by Dan Grebler)
