(Updates to U.S. midsession, changes byline, dateline,
previous LONDON)
By Cal Mankowski
NEW YORK, Jan 8 (Reuters) - U.S. stocks turned turned lower
on Tuesday, after earlier gains on world equities markets, amid
ongoing concerns about a slowing U.S. economy, while gold
prices jumped to a new record as oil prices recovered.
More evidence of a weakening U.S. housing market came to
light with pending home sales down 2.6 percent in November,
while concern about further write downs of mortgage related
assets hit U.S. bank stocks.
"The continuing rumors of draconian measures need by
financial institutions to shore up their balance sheets,
particularly in the housing sector, is what is leading the
market lower after a very strong start," said Peter Kenny,
managing director at Knight Equity Markets in Jersey City, New
Jersey.
By midsession in New York the Dow Jones industrial average
<> was down 0.36 percent at 12,782, while the Standard &
Poor's 500 Index <.SPX> was down 0.18 percent at 1,413.61, and
the Nasdaq Composite Index <> was off 0.14 percent at
2,495.87.
Earlier stocks in Europe and Japan firmed helping Morgan
Stanley's main world index to edge up 0.25 percent to 391.21
<.MIWD00000PUS>.
The FTSEurofirst 300 Index <> rose 0.7 percent to
1,467.76. Pharmaceuticals were among the narket leaders with
GlaxoSmithKline <GSK.L> up 3 percent and Roche <ROG.VX> up 6
percent.
In Tokyo, the Nikkei <> closed higher for the first
time in the new year after first touching an 18-month low.
"The market is torn between two factors: fears of a U.S.
recession on both the earnings and the macroeconomic fronts,
and hopes that the Federal Reserve will cut rates aggressively.
The latter factor could underpin the market," said Franz
Wenzel, strategist at AXA Investment Managers, in Paris.
GOLD HITS NEW RECORD
Reflecting fears of economic trouble globally, gold hit a
fresh record of $880.1 per ounce <XAU=> by midsession in New
York.
"There is definitely investor money coming into the market
which is no surprise with economic environment's ongoing
uncertain outlook," said Alexander Zumpfe, a trader at
Heraeus.
Oil prices also recovered after a three day fall, lifted by
the threat of violence in Nigeria and expectations U.S. oil
inventories fell again last week.
On the New York Mercantile Exchange by midsession, February
crude oil <CLG8> was up $2.21 or 2.32 percent at $97.30 per
barrel.
Armed groups in Nigeria's oil producing south are building
up for a major attack on an oil facility, according to security
sources on Tuesday. []
In currency markets, the U.S. dollar slipped, though
analysts said much of the bad news on the world's biggest
economy has already been priced into the market.
The New York Board of Trade's dollar index <.DXY> was off
0.15 percent at 76.06 midsession, while the euro <EUR=> was up
0.17 percent at $1.4710, and the U.S. dollar was little changed
against the Japanese yen around 109.34 yen <JPY=>.
Many analysts continue to be bearish on the prospects for
the U.S. dollar, though they think falls will be more muted
than seen last year.
"In our view, the dollar will resume its downtrend,
although the trend won't be as linear as it had been during the
last year," Commerzbank Corporates & Markets said in a note to
clients.
In debt markets, U.S. Treasuries eased on Tuesday as
earlier stock market gains dimmed the allure of safe-haven
government bonds and investors digested the latest Federal
Reserve commentary.
The benchmark 10-year U.S. Treasury note <US10YT=RR> was
down 7/32, with the yield at 3.86 percent at midday in New
York.
Investors have been eager to see whether policy-makers
would give any support to market speculation that the Fed could
lower interest rates by a half percentage point at its Jan.
29-30 meeting to shore up the struggling U.S. economy.
Federal Reserve Bank of Philadelphia President Charles
Plosser on Tuesday said he was open to further rate cuts but
had not made up his mind, while also reminding markets of
inflation concerns.
Traders were likely to await Fed Chairman Ben Bernanke's
speech on Thursday before making a final interpretation of
central bank commentary this week.
In Europe earlier, the two-year Schatz yield <EU2YT=RR> was
up 3.3 basis points at 3.809 percent. The 10-year Bund yield
<EU10YT=RR> was up 2.6 basis points at 4.143 percent.
The European Central Bank is expected to keep interest
rates unchanged at its policy meeting on Thursday this week.
(Additional reporting by Jeremy Gaunt in London; editing by
Clive McKeef)
