(Updates U.S. trading, prices, changes dateline)
* US shares drop as Fed commitment underscores weak growth
* Asia, emerging stocks help MSCI world equity index
* Dollar hits 5-month low vs euro; gold sets new high
By Al Yoon
NEW YORK, Sept 22 (Reuters) - The dollar slumped against
other major currencies and global shares declined on Wednesday
after the Federal Reserve opened the door to more monetary
easing, signaling the depth of its concern over weak growth.
Gold hit a record high amid speculation that U.S.
government stimulus would quicken inflation, while the
prospects of more cash flowing through the system boosted
stocks and currencies in developing economies that are
outperforming Europe and the United States.
The Fed said on Tuesday it stood ready to pump new dollars
into the economy -- a second round of so-called quantitative
easing. The central bank made no policy shift, but investors,
interpreting the statement as more easing was on the way, took
profits in stocks built so far this month, analysts said.
European and Wall Street shares drifted lower as investors
were torn between expectations for Fed help and its message of
a faltering economic recovery. They were also uncertain if Fed
moves would be enough to ward off a double-dip recession.
"Investors are realizing things will have to deteriorate
first in the economy before the Fed is going to intervene,"
said Philippe Gijsels, head of research at BNP Paribas Fortis
Global Markets in Brussels.
The Dow Jones industrial average <> dropped 45.67
points, or 0.42 percent, to 10,715.36. The Standard & Poor's
500 <.SPX> fell 7.28 points, or 0.64 percent, to 1,132.50. The
technology-heavy Nasdaq Composite <> lost 24.29 points, or
1.03 percent, to 2,325.06.
One of the biggest Nasdaq losers was Adobe Systems Inc
<ADBE.O>, off 20 percent to $26.36 after the software maker
forecast lower-than-expected revenues. For details, see
[]
Microsoft Corp <MSFT.O> declined 2.6 percent to $24.50
after the cash-rich computer software giant raised its
quarterly dividend, and said it might use proceeds from a debt
issue for the payout. []
In Europe, the FTSEurofirst 300 index <> dropped 1.5
percent, while the MSCI world equity index <.MIWD00000PUS> rose
0.1 percent, boosted by Asian and other emerging market shares
as emerging market stocks <.MSCIEF> rose 0.5 percent.
The Thomson Reuters global stock index <.TRXFLDGLPU>
declined 0.4 percent.
Investors' major concern in Europe remained the levels of
government debt. Persistent worries about Ireland's fiscal
deficit pushed the spread of its 10-year bond yield over German
Bunds to euro lifetime highs of 4.25 percentage points.
<IE10YT=TWEB>
Ireland's borrowing costs jumped at a bond auction but
appetite for its bonds as well as Spanish and Greek debt was
enough to lift their bond markets.
Despite austerity measures in Ireland, investors demanded
higher yields on its bonds because of worries about the cost of
bailing out its banks, and the toll that economic troubles
could take on tax revenues.
The dollar <.DXY> fell 0.6 percent to a six-month low
against a basket of major currencies.
The euro rose as high as $1.3440 <EUR=>, its strongest
since April, as traders believing in the success of Fed
stimulus took on risk. At midday in New York, the euro gained 1
percent to $1.3384. Against the Japanese yen, the dollar <JPY=>
fell 0.81 percent to 84.40 yen.
The sliding dollar helped gold <XAU=>, which rose to a
record high above $1,296 an ounce before easing to $1288.10.
U.S. crude oil <CLc1> reversed gains and fell 1 percent to
$74.14 a barrel.
"It looks like the hurdle for (quantitative easing) has
been lowered, and the Fed is more concerned about the inflation
picture," said Nick Stamenkovic, rate strategist at RIA
Capital, who added that the Fed may act as early as November.
Yields on benchmark U.S. Treasuries fell to their lowest
levels in three weeks as traders extended a rally from Tuesday,
when the Fed raised prospects of more quantitative easing. This
easing could be in the form of Treasury bond purchases,
economists said.
The yield on the benchmark 10-year Treasury note
<US10YT=RR> declined 0.05 percentage point to 2.53 percent.
(Additional reporting by Joanne Frearson and Amanda Cooper in
London, Carmel Crimmins in Dublin and Vivianne Rodrigues in New
York; editing by Jeffrey Benkoe)
