* US new home sales at 7-month low, temper economy hopes
* European shares close higher as banks gain
* Dollar halts rally on data disappointment, profit taking
(Updates with U.S. markets close)
By Walter Brandimarte
NEW YORK, Dec 23 (Reuters) - The dollar halted a six-day
rally and global stocks lost steam on Wednesday after an
unexpected fall in U.S. new home sales curbed optimism about
the economic recovery.
Oil prices jumped 3 percent, supporting energy shares, as
data showed a much larger-than-expected decline in inventory of
crude oil. The weaker dollar also boosted commodity prices in
general, sending gold as much as 1 percent higher. A weaker
dollar makes commodities cheaper for investors using other
currencies.
Stocks trimmed gains after the government reported sales
of newly built U.S. single-family homes fell to a seven-month
low in November, but the S&P 500 eked out a small gain to close
at a 14-month high and the Nasdaq ended at a 15-month high
after solid earnings from technology companies.
European shares also closed at their highest level in
almost 15 months, driven by gains in financial stocks, although
the U.S. housing data caused the market to pare gains.
Sales of newly built U.S. single-family homes dropped 11.3
percent last month to a 355,000 unit annual rate, frustrating
economists who had forecast an increase to 440,000 units. For
details, see []
The data reminded investors that the path to a recovery
will be bumpy, one day after a larger-than-expected jump in
sales of existing U.S. homes fueled a market rally.
"It's clearly a disappointing number," said Nick
Bennenbroek, head of currency strategy at Wells Fargo in New
York. "You're going to get bumps along the road every so often
as far as recovery is concerned. It might change sentiment
regarding interest rates and the dollar a little bit."
On Wall Street, solid earnings from Micron Technology
<MU.N> and Red Hat <RHT.N> drove up technology shares and
bolstered the stock market. [] []
The Dow Jones industrial average <> edged up 1.51
points, or 0.01 percent, to 10,466.44, while The Standard &
Poor's 500 Index <.SPX> rose 2.57 points, or 0.23 percent, to
1,120.59. The Nasdaq Composite Index <> ended up 16.97
points, or 0.75 percent, to 2,269.64.
European shares advanced as banks gained. The FTSEurofirst
300 <> index of top European shares rose 0.2 percent to
its highest close since Oct. 3, 2008. Total trading volume in
the index, which is up 24 percent this year, was just 41
percent of the three-month daily average.
The MSCI index for emerging market stocks <.MSCIEF> was 1.3
percent higher.
DOLLAR HALTS RALLY
The dollar fell from a 3-1/2-month high against the euro
and halted a six-day rally against a basket of major currencies
after the U.S. housing data, which also included a downward
revision to the previous month's figure.
Trading was extremely thin, however, which may have
exaggerated currency moves. Tokyo markets were closed for a
national holiday and many market players elsewhere have already
wound down for the Christmas holidays and year-end.
The euro <EUR=> gained 0.57 percent to $1.433. Against the
Japanese yen, the dollar <JPY=> firmed 0.21 percent at 91.65.
The U.S. dollar index <.DXY>, which measures the
performance of the greenback against a basket of major
currencies, was 0.44 percent lower.
"Folks are taking some profits on their long dollar
positions ahead of the holiday," said Samarjit Shankar,
managing director of global FX strategy at BNY Mellon in
Boston.
But sterling fell after the Bank of England's December
policy meeting minutes showed that officials felt little had
changed since November. That was seen as leaving the door open
to a further expansion of the central bank's asset buying
program. []
The pound <GBP=D4> fell as low as $1.5924, one tick from
Tuesday's trough, which was the weakest level since
mid-October. It was little changed at $1.5971 late on the
session.
U.S. Treasury prices rose during the session following
several days of losses but demand for the safe-haven asset
class faded at the end of the session amid very thin volumes.
Benchmark 10-year Treasury notes <US10YT=RR> were unchanged
with the yield at 3.76 percent. Two-year notes <US2YT=RR> fell
1/32 in price, with the yield at 0.9256 percent from 0.92
percent late on Tuesday.
U.S. light crude oil <CLc1> rose $2.27 to $76.67 per
barrel, while spot gold prices <XAU=> climbed 0.33 percent to
$1,086.80 per ounce, after jumping as much as 1 percent
earlier.
(Additional reporting by Wanfeng Zhou, Chuck Mikolajczak and
Chris Reese; editing by Leslie Adler)
