* U.S. stocks sputter after global equity rally
* Oil rises on recovery hopes, signs of China demand
* Dollar edges up before U.S. consumer data this week
* Bond prices rise as investors hunt for bargains
(Updates with close of U.S. markets)
By Herbert Lash
NEW YORK, Aug 24 (Reuters) - Crude oil extended gains on
Monday but a rally in world equity markets sputtered in the
United States after investors questioned whether stock prices
had outpaced the potential strength of economic recovery.
Oil prices briefly touched a 10-month high near $75 a
barrel after reports showed that new industrial orders in the
euro zone rebounded in June and U.S. economic activity improved
again in July. <For related news click []
[]>.
The dollar edged up against the euro and yen in extremely
thin trade as Wall Street surrendered earlier gains and traders
repositioned themselves ahead of key U.S. consumer and housing
data due later in the week. []
The early rally in U.S. stocks faded about midday after U.S.
Treasuries rose as investors swooped in to take advantage of
sharp losses in government debt markets on Friday.
"We have been recently seeing a disconnect between the two
markets. Stocks were up on economic optimism and bonds were up
on economic concerns," said Peter Boockvar, equity strategist
at Miller Tabak & Co in New York.
"Investors are finally catching up with this, and seeing
Treasuries as a sign that they should not be buying so much,"
Boockvar said.
The Dow Jones industrial average <> closed up 3.32
points, or 0.03 percent, at 9,509.28. The Standard & Poor's 500
Index <.SPX> slipped 0.56 point, or 0.05 percent, at 1,025.57.
The Nasdaq Composite Index <> fell 2.92 points, or 0.14
percent, at 2,017.98.
RISE IN MIDWEST MANUFACTURING
Economic data was cheered by some investors, but others saw
reasons for caution. A rise in the Chicago Federal Reserve
Bank's Midwest manufacturing index was led by a surge in auto
output after the White House's "cash for clunkers" program.
[]
In addition, Nouriel Roubini, one of the few economists who
predicted the magnitude of the world financial crisis, said in
an Financial Times article a recovery is likely to be anemic
and there is a "big risk" of a double-dip recession.
The lock-step in which commodity prices have tracked equity
markets higher in recent months is an anomaly and could come
under pressure, said Troy Buckner, managing principal of hedge
fund NuWave Investment Management in Morristown, New Jersey.
"It's been an extreme correlation between equity market
movements and commodities, especially copper, aluminum and
crude oil," he said. "Prices have moved too far too fast."
NuWave has bet crude and heating oil prices will fall,
while it has reduced long positions in copper and aluminum.
U.S. crude <CLc1> rose 48 cents to settle at $74.37 a
barrel after peaking at $74.81, the highest intraday price
since Oct. 21. Brent crude <LCOc1> gained 7 cents to $74.26.
The gains followed the early rise on Wall Street.
"The stock market's rise is driving crude oil futures
higher, with the outlook controlled by economic optimism," said
Phil Flynn, analyst at PFGBest Research in Chicago.
U.S. gold futures fell, losing more than 1 percent in thin
volume. U.S. December gold futures <GCZ9> settled down $11 at
943.70 an ounce in New York.
The dollar strengthened against a basket of currencies,
putting downward pressure on gold by making dollar-priced
commodities more expensive for holders of other currencies.
[]
The dollar was last up 0.1 percent at 94.49 yen <JPY=>,
while the euro slipped 0.2 percent to $1.4293 <EUR=>.
European shares hit their highest closing level in nearly
10 months, boosted by banks and miners.
The FTSEurofirst 300 <> index of top European shares
ended 0.9 percent up at 975.19 points, the highest closing
level since early November.
Banks were among top gainers, with DJ STOXX banking index
<.SX7P> rising 1.8 percent.
Japan's Nikkei average <> jumped 3.4 percent, booosted
by hopes for a global recovery and lifted by camera maker Canon
Inc <7751.T> and other exporters.
(Reporting by Ryan Vlastelica, Gertrude Chavez-Dreyfuss, Chris
Reese in New York; Jamie McGeever, Atul Prakash, Alex Lawler
and Ian Chua in London and Richard Valdmanis in Portland,
Maine; writing by Herbert Lash; Editing by Kenneth Barry)
