* US inflation surprise props dollar, weighs on bonds
* Oil rises nearly 2 percent after 9 declining sessions
* Wall St adds to losses on poor GE outlook
(Corrects to remove erroneous reference to GE's 2010 revenues
being down 5 percent to 10 percent in paragraph 8)
By Walter Brandimarte
NEW YORK, Dec 15 (Reuters) - Higher-than-expected November
U.S. inflation fueled demand for the dollar on Tuesday. but
weighed on stocks and bonds as investors feared the Federal
Reserve may need to raise rates faster than anticipated.
Oil futures prices rose almost 2 percent to settle above
$70 a barrel following nine sessions of losses, offering some
support to energy stocks. But Wall Street extended losses in
late afternoon after bellwether General Electric Co <GE.N>
issued a flat outlook for 2010.
Fears that the Fed could end its two-day meeting on
Wednesday with a more hawkish view on interest rates surfaced
after data showed the U.S. Producer Price Index jumped a
surprising 1.8 percent last month, much more than the 0.8
percent forecast by economists. For more, see [].
"Everyone's on inflation watch," said Burt White, chief
investment officer with LPL Financial in Boston.
"Indeed, inflation is starting to creep in, and that's
going to build expectations the Fed will come in sooner, to
slow the economic recovery down faster than what this market
wants."
For a graphic on U.S. PPI, see
http://graphics.thomsonreuters.com/129/US_PRODP1209.gif
Stocks slipped globally, with the MSCI all-country world
stock index <.MIWD00000PUS> down 0.6 percent.
The Dow Jones industrial average <> slid 49.05 points,
or 0.47 percent, to close at 10,452.00, while the Standard &
Poor's 500 Index <.SPX> declined 6.18 points, or 0.55 percent,
to finish at 1,107.93. The Nasdaq Composite Index <> fell
11.05 points, or 0.50 percent, to end at 2,201.05.
GE shares slid 1.3 percent to $15.75 after the company,
considered an indicator of the U.S. economy's health, said its
industrial and capital finance profits will likely be flat next
year.
In Europe, however, the FTSEurofirst 300 <> index of
leading shares edged up 0.02 percent, holding the gains
recorded in the previous three sessions.
In recent weeks, the relationship among stocks and the
dollar, oil and gold has broken down, with those asset classes
trading more independently of one another than they normally
do.
For a graphic on those assets in 2009, see
http://graphics.thomsonreuters.com/129/US_DGSPB1209.gif
DOLLAR RALLIES
The U.S. dollar rallied to a 2-1/2-month high against the
euro on speculation of higher U.S. interest rates, but also
because the European single currency was hurt by fiscal
concerns in the euro zone following the downgrade of Greece's
credit rating last week.
Adding to those concerns was news that Austrian monetary
authorities had put the country's fourth-largest bank,
Oesterreichische Volksbanken <OTVVp.VI>, on a watch list.
[]
"Problems in Greece continue, and the news about the
Austrian bank hasn't helped, either," said Ian Stannard,
currency strategist at BNP Paribas in London.
The euro <EUR=> weakened 0.83 percent to $1.4533. Against
the Japanese yen, the dollar <JPY=> gained 1.2 percent to
89.62. The greenback was also stronger against a basket of
major trading-partner currencies, with the U.S. dollar index
<.DXY> rising 0.76 percent.
Inflation anxiety drove prices of U.S. Treasuries lower.
The 30-year bond <US30YT=RR>, the longest Treasury
maturity, last traded down 25/32, with the yield at a
four-month high of 4.5321 percent.
The benchmark 10-year U.S. Treasury note<US10YT=RR> fell
12/32 in price, with the yield at 3.5975 percent, its highest
level since August.
U.S. crude oil <CLc1> rose 1.7 percent, or $1.18, to settle
at $70.69 per barrel, ahead of weekly inventory reports
expected to show crude stockpiles fell last week.
Analysts also said oil was oversold after a nine-day streak
of losses.
(Additional reporting by Richard Leong, Steven C. Johnson and
Robert Gibbons; Editing by Jan Paschal)
