* Wall Street pulls back from Monday's euphoric gains
* World stocks hit 5-week high before easing
* Dollar rises on hopes U.S. economy will revive
(Updates with U.S. markets, changes dateline from London,
byline)
By Burton Frierson
NEW YORK, March 24 (Reuters) - Wall Street dipped on
Tuesday, pulling world stocks off 5-week highs as euphoria over
plans to purge the U.S. financial sector of bad assets faded.
The dollar gained, however, as currency traders bet the
U.S. Treasury's plan, announced on Monday, to persuade private
firms to help rid banks of up to $1 trillion in bad assets
would put the United States on the path to recovery before
others.
Strength in the dollar put oil and gold on the defensive
and also contrasted with Wall Street's retreat, where equities
investors reassessed whether and how soon any plan for
disposing of bad assets might translate into good health in the
financial sector.
"It's usually when there's extreme panic and questions
about the overall economic system, like we saw in late February
and early March, that bottoms are made," said Tim Ghriskey,
chief investment officer of Solaris Asset Management, in
Bedford Hills, New York.
"I don't think that means we're off to the races and we're
going to see a major rally here, but there are certainly signs
of better times ahead."
Globally, the MSCI World index of stocks <.MIWD00000PUS>
eased slightly but only after rising to its highest level in
more than a month.
U.S. stocks had surged about 7 percent on Monday, helping
lift the benchmark S&P 500 index more than 20 percent from the
bear market closing low set on March 9, but the index remains
off nearly 10 percent for the year.
By midday on Tuesday U.S. indexes were down on declining
energy shares and profit-taking in financials after Monday's
rally. The Dow Jones industrial average <> was off 54.40
points, or 0.70 percent, at 7,721.46.
The Standard & Poor's 500 Index <.SPX> was down 7.23
points, or 0.88 percent, at 815.69. The Nasdaq Composite Index
<> was down 24.95 points, or 1.60 percent, at 1,530.82.
In Tokyo, Japan's Nikkei average jumped 3.3 percent to hit a
2-1/2-month closing high on Tuesday in the spillover of the
U.S. plan to deal with bad assets plaguing the financial
sector.
The benchmark Nikkei <> ended up 272.77 points at
8,488.30, its highest close since Jan. 9.
European shares closed slightly higher.
The pan-European FTSEurofirst 300 <> index of top
shares was 0.2 percent higher at 740.86 points at provisional
close, after being up as much as 750.71 points and down as low
of 734.04 points, earlier in the day.
EURO PRESSURE
On the currency market, the dollar's gains were helped by
pressure on the euro after policymakers suggested that interest
rates in the region could fall further, just as data showed
manufacturing and services sector activity continued to
contract significantly.
European Central Bank governing council member Erkki
Liikanen said the central bank has not used up all its "room
for maneuver" on interest rates [].
The news followed comments overnight from ECB President
Jean-Claude Trichet, who again said interest rates could be cut
to help kick-start the economy. [].
"The ECB has room to cut rates, which may undermine the
euro slightly, but it's more a dollar story than the euro,"
said Carole Lualhere, currency strategist at Societe Generale
in Paris.
Indeed, the news out of Europe contrasted with glimmers of
hope in U.S. data, with figures showing a 1.7 percent rise in
home prices from January from December.
Some took it as a sign that the U.S. housing sector, whose
spectacular tumble caused the global financial turmoil, might
be pulling out of its tailspin.
It came a day after data showed sales of previously owned
U.S. homes rose at their fastest pace in nearly six years in
February.
The dollar was up against a basket of major
trading-partner currencies, with the U.S. Dollar Index <.DXY>
up 0.28 percent at 83.702 from a previous session close of
83.465.
The euro <EUR=> was down 0.51 percent at $1.3559 from a
previous session close of $1.3629. Against the Japanese yen,
the dollar <JPY=> was up 0.99 percent at 97.98 from a previous
session close of 97.020.
U.S. Treasury debt prices trimmed losses after the
Treasury's $40 billion two-year note sale alleviated worries
about faltering demand for government securities.
Benchmark 10-year notes <US10YT=RR> were down 18/32 in
price, compared with a 21/32 decline before the auction
results. The yield was 2.72 percent, up from 2.65 percent late
on Monday.
In energy and commodities prices, U.S. light sweet crude
oil <CLc1> fell $1.04, or 1.93 percent, to $52.76 per barrel
and spot gold prices <XAU=> fell $14.75, or 1.57 percent, to
$922.40.
The Reuters/Jefferies CRB Index <.CRB> was down 1.49
points, or 0.65 percent, at 228.05.
(Additional Reporting by Reuters bureaus worldwide; Editing
by Kenneth Barry)
