* Stocks decline as dollar reverses course
* Euro slips on Irish debt concern
* Gold hits record $1,400 an ounce
(Updates with European stocks' close)
By Al Yoon
NEW YORK, Nov 8 (Reuters) - Stocks fell on Monday as
renewed concerns about Ireland's resolve to address its debt
load dragged the euro lower and gave the dollar a reprieve from
weeks of drubbing, but gold surged on inflation worry.
Newspaper reports raising fresh doubts about Ireland's
ability to fund itself internationally have weighed on the euro
and caused spreads between Irish and German government bond
yields to widen.
This eased pressure on the dollar, which had endured weeks
of selling amid expectations that the Federal Reserve would
embark on a huge monetary stimulus in the form of U.S. debt
purchases. The Fed last week affirmed the speculation, with the
announcement of another $600 billion in quantitative easing.
But a stronger-than-expected U.S. labor market report on
Friday eased concern of extensive Fed easing.
"We're finally seeing the market turn its gaze away from
Fed easing and toward these ongoing problems in peripheral
Europe," said Matthew Strauss, senior strategist at RBC Capital
Markets in Toronto.
"Even before the Fed meeting, spreads for Ireland, Greece,
Portugal were widening, and now that the Fed has indicated what
it will do, the market is starting to trade on these worries."
While Ireland does not face any immediate liquidity demands
-- it is fully funded until the middle of next year -- there
are real concerns that if Prime Minister Brian Cowen fails to
get his 2011 budget passed in December, the country will be
unable to return to the bond markets, as planned, in January.
World stocks as measured by MSCI <.MIWD00000PUS> fell 0.2
percent after rising last week to levels last reached prior to
the collapse of Lehman Brothers.
On Wall Street, stocks maintained an inverse relationship
with the dollar, which had slumped to a 9-1/2 month low against
the euro on concern the Fed stimulus would fuel inflation. Spot
gold surged to a record high $1,402 an ounce as investors
bought the precious metal as an inflation hedge.
The Dow Jones industrial average <> fell 43.90 points,
or 0.38 percent, at 11,400.18. The Standard & Poor's 500 Index
<.SPX> declined 3.96 points, or 0.32 percent, at 1,221.89 and
the Nasdaq Composite Index <> was flat at 2,578.86.
U.S. financial stocks were among the biggest losers. The
S&P financial index <.GSPF> declined 0.7 percent, weighed down
by a 1 percent decline in shares of Wells Fargo & Co <WFC.N>
and a 1.9 percent drop in State Street Corp <STT.N>.
The FTSEurofirst 300 <> index of top European shares
ended a tad lower, with investors cashing in on six-month high
prices reached on Friday.
"Some degree of profit-taking doesn't come as a surprise
after a gain of about 15 percent since late August. The market
might lack a little bit of direction for the first day or two
of the week," said Keith Bowman, analyst at Hargreaves
Lansdown.
Metals prices slipped as the dollar rose, while oil futures
<CLc1> fell 0.21 percent to $86.67 a barrel, easing from
two-year highs earlier in the session. Shares of Alcoa Inc
<AA.N>, the largest U.S. aluminum producer, fell 0.9 percent to
$13.88.
The dollar has been weakening as a result of the Fed's
quantitative easing, a form of money-printing stimulus.
On Monday, however, the U.S. currency was up 0.53 percent
against major currencies <.DXY>, recouping recent losses
following the surprisingly strong U.S jobs data.
The euro was notably weak, down 0.7 percent at $1.3934
<EUR=>. Against the Japanese yen, the dollar <JPY=> was down
0.14 percent at 81.14 yen.
The premium that investors demand to hold Irish debt over
benchmark German bunds rose on Monday, extending a month-long
climb that has seen Irish borrowing costs reach record highs on
a near daily basis.
U.S. government debt prices were mostly lower, with the
benchmark 10-year U.S. Treasury down 4/32 and the yield at 2.55
percent. Shorter-term yields edged higher ahead of the
Treasury's $32 billion three-year note auction.
In other stock markets, the Athens bourse's banking index
<.FTATBNK> jumped 2.5 percent after results of local elections
ruled out a snap general election in the economically strapped
euro zone country.
The Nikkei average <> climbed 1.1 percent to a
three-month closing high.
(Additional reporting by Steven C. Johnson and Edward Krudy in
New York and Tamawa Desai, Atul Prakash and European Investment
Correspondent Jeremy Gaunt in London, and Carmel Crimmins in
Dublin; Editing by Kenneth Barry)
