* Stocks decline as dollar reverses course
* Euro unglued on Irish debt concern
* Gold tops $1,400 an ounce for fresh record high
(Updates with U.S. close)
By Al Yoon
NEW YORK, Nov 8 (Reuters) - World stocks weakened on Monday
as renewed European debt concerns and a sign of recovery for
the U.S. labor market sent the euro reeling versus the dollar,
while 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.
Skepticism over Europe's fiscal troubles eased pressure on
the dollar, which had endured weeks of selling on expectations
of huge monetary easing by the Federal Reserve. Friday's
stronger-than-expected U.S. jobs report eased concern that the
Fed would go beyond the $600 billion in Treasury purchases on
which it decided.
"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
and 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.
Trading in Tokyo was poised to open slightly lower, with
the December futures contract that trades in Chicago for the
Nikkei 225 <0#NK:> down 20 points at 9,705.
Spot gold surged to a record high $1,410.30 an ounce as
investors bought the precious metal as an inflation hedge.
Gold has risen almost 6 percent since just before the Fed
detailed its plans for more "quantitative easing."
"People have gotten to the point that they have lost
confidence in the fiat currencies and they are choosing gold as
their currency of choice," said Michael Daly, gold specialist
at futures broker PFGBest.
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.
The Dow Jones industrial average <> fell 37.24 points,
or 0.33 percent, to 11,406.84. The Standard & Poor's 500 Index
<.SPX> edged lower by 2.60 points, or 0.21 percent, at 1,223.25
and the Nasdaq Composite Index <> managed a gain of 1.07
points to 2,580.05.
The S&P 500 had risen for five straight weeks and nine of
the past 10, supported by the Fed's efforts to lower interest
rates and reinvigorate a sluggish economy. With valuations at
recent highs, investors booked profits.
U.S. financial stocks were among the biggest losers. The
S&P financial index <.GSPF> declined 0.77 percent, weighed down
by a 0.7 percent decline in shares of Wells Fargo & Co <WFC.N>
and a 1.6 percent drop in State Street Corp <STT.N>.
The FTSEurofirst 300 <> index of top European shares
slipped 0.4 percent, 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> were little changed at $86.90 a barrel. Shares of Alcoa
Inc <AA.N>, the largest U.S. aluminum producer, fell 0.3
percent to $13.96.
The dollar had been weakening as a result of the Fed's
money-printing stimulus.
On Monday, however, the U.S. currency was up 0.63 percent
against major currencies <.DXY>, recouping recent losses
following the surprisingly strong U.S jobs data.
The euro was notably weak, down 0.79 percent at $1.3920
<EUR=>. Against the Japanese yen, the dollar <JPY=> was down
0.11 percent at 81.16 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 yield rising 0.01 percentage
point to 2.55 percent. Shorter-term yields rose as the Treasury
auctioned $32 billion in three-year notes.
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.
(Additional reporting by Steven C. Johnson, Edward Krudy,
Angela Moon and Frank Tang in New York and Tamawa Desai, Atul
Prakash and European Investment Correspondent Jeremy Gaunt in
London, and Carmel Crimmins in Dublin; Editing by Dan Grebler)
