* Dollar trade-weighted index hits lowest since Jan
* Markets wary of weak US data, further QE from Fed
By Daniel Bases
NEW YORK, Sept 29 (Reuters) - Rising expectations central
banks will step up monetary stimulus to support fragile
economies drove the dollar to a five-month low against the euro
on Wednesday and fed profit taking in stocks.
Investors trimmed their U.S. and European equity positions
while an uncertain economic outlook kept commodity prices from
rallying too strongly despite the benefit they often get from a
sagging U.S. dollar.
Spot gold <XAU=> did edge up to fresh record high of
$1,313.20 and silver <XAG=> set its best level in 30 years. Oil
made only a modest gain on the day.
"We obviously have a negative combination for the U.S.
dollar, and the Fed opening the door for potential easing has
just stoked fears of dollar weakness and currency debasement
generally," said Camilla Sutton, chief currency strategist at
Scotia Capital in Toronto.
Wednesday's contrasting reports of Chinese []
and European [] economic and business sentiment
advancing this month added to pressure on the greenback.
There is mounting speculation the U.S. Federal Reserve may
engage in quantitative easing -- a process of buying up bonds
and other assets to put fresh cash into the economy rather than
through lower borrowing costs -- sooner rather than later.
Last week, the Fed said it was prepared to do just that if
it were necessary to stimulate the recovery and avoid
deflation. The Fed's benchmark interest rate is already at zero
to 0.25 percent, leaving no room to stimulate through
conventional measures.
In midday U.S. trade, the Dow Jones industrial average
<> fell 45.45 points, or 0.42 percent, at 10,812.69. The
Nasdaq Composite Index <> dropped 9.69 points, or 0.41
percent, at 2,369.90.
The Standard & Poor's 500 Index <.SPX> lost 5.52 points, or
0.48 percent, at 1,142.18. However, for the month the index is
up nearly 9 percent, its best monthly performance since May
2009 and before that the best showing since March 2000.
Hewlett-Packard Co <HPQ.N> rose 1.4 percent to $42.25 after
the computer and printer maker forecast 2011 profits above
estimates. For details, see []
Marc Pado, U.S. market strategist at Cantor Fitzgerald & Co
in San Francisco, said the market was technically overextended,
but a recent pattern of buying on dips could re-emerge as fund
managers "window dress" their portfolios.
European shares gave up earlier gains after the U.S. market
opened weaker.
The FTSEurofirst 300 <> index of top European shares
was down 0.61 percent at 1070.77. Weaker retail shares after
disappointing figures from Swedish fashion group Hennes &
Mauritz <HMb.ST>, the world's third largest clothing retailer,
proved a drag on the index.
European banks <.SX7P> were down 1.3 percent.
Japan's Nikkei <> closed up 0.7 percent, helped by
quarter-end "window dressing" positioning and expectations that
the BOJ will respond to the worsened outlook from Japanese
manufacturers by further easing its policy when it meets on
Oct. 4-5.
MSCI world equity index <.MIWD00000PUS> and the Thomson
Reuters global stock index <.TRXFLDGLPU> both fell slightly.
^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^For graphic on world asset market performance in Q3 and
^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^For graphic on world asset market performance in Q3 and
YTD:
http://graphics.thomsonreuters.com/F/09/GLB_MKTQE.html
^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^
CURRENCIES AND DEBT
The dollar's weakness against the euro and the yen puts
more pressure on exporters in Europe and Japan. The outlook
isn't likely to change, says one bank.
"The backdrop for the dollar continues to deteriorate,"
JPMorgan said, advising clients to seize any bounce in the
dollar as a chance to sell. "The increased focus on QE
(quantitative easing) and the break of several key dollar
support levels maintained the overall bearish bias."
The greenback fell versus a basket of major trading-partner
currencies, with the U.S. Dollar Index <.DXY> down 0.32 percent
at 78.762.
The euro <EUR=> rose 0.31 percent at $1.3621. The dollar
fell 0.26 percent to 83.66 yen <JPY=>.
In Asia, where the Bank of Japan's yen sales are also akin
to money printing, Japanese government bond futures hit a
seven-year high.
Benchmark 10 year U.S. Treasuries <US10YT=RR> are off 3/32
of a point in price, yielding 2.48 percent.
(Additional reporting by Manuela Badawy, Gertrude
Chavez-Dreyfuss, Edward Krudy, Mike Dolan, Neal Armstrong,
Joanne Frearson, Vikram Subhedar, Masayuki Kitano and
Charlotte Cooper, Editing by W Simon )
