* Gold, commodities surge on inflation fears
* Wall Street zigzags after touching multiyear highs
* Euro zone debt worries hangs over currency market
(Updates with U.S. markets' open, changes byline, dateline
from LONDON)
By Manuela Badawy
NEW YORK, Nov 9 (Reuters) - Gold surged and the dollar rose
against the euro on Tuesday on uncertainty over high sovereign
debt in euro zone countries, while U.S. stocks paused after a
recent rally drove indices to two-year highs.
Gold extended its record highs to a fourth straight session
and oil rose to a two-year high, helped by inflation fears and
euro zone debt worries. The Federal Reserve's decision to
undertake more stimulus has contributed to the dollar's recent
downward trend and led some to worry about inflation.
"We have a combination: inflation fears, currency market
uncertainty, fears about the financial strength of some
countries," said Alexander Zumpfe of Heraeus Metals.
Debt-striken countries such as Ireland, Portugal and Spain
are back in the headlines with the cost of protecting
government debt against default rising substantially in the
past week, although credit default swap prices eased a bit on
Tuesday ahead of a Portuguese bond auction. []
The cost of protecting Portuguese government debt against
default rose to a record high.
The renewed concerns about peripheral euro zone economies
weighed on the euro <EUR=>, which hit its lowest in more than a
week versus the dollar, it was last trading down 0.36 percent
at $1.3873.
Some players also closed long positions against the dollar
ahead of year-end book-closing.
The dollar was up against a basket currencies, with the
U.S. Dollar Index <.DXY> rising 0.19 percent at 77.172. Against
the Japanese yen, the dollar <JPY=> was down 0.27 percent at
80.920.
U.S. equities were little changed with few catalysts to
drive the market after five weeks of gains, although investors
said the recent uptrend remained in place with merger activity
a sign of things to come.
The Dow Jones industrial average <> was down 9.80
points, or 0.09 percent, at 11,397.04. The Standard & Poor's
500 Index <.SPX> was down 0.22 points, or 0.02 percent, at
1,223.03. The Nasdaq Composite Index <> was up 0.64
points, or 0.02 percent, at 2,580.69.
European shares <>, however, shrugged off euro zone
debt concerns and climbed to two-year highs, up 0.82 percent,
on strong company earnings reports.
The MSCI all-country world equity index <.MIWD00000PUS>
rose 0.13 percent. Emerging market stocks <.MSCIEF> were up
0.25 percent.
"Quantitative easing, decent macroeconomic data and
valuations have helped equities to move higher. Earnings have
also played a big role," said Klaus Wiener, head of research at
Generali Investments, in Cologne.
"We are in a year-end rally and I don't see any disturbance
from the macro data side. The only thing which could be a bit
of a problem is the situation in countries like Ireland but
this is not being perceived as something which could derail the
whole monetary union project."
COMMODITIES RISE, G20 EYED
Gold's rise was assisted by the Fed's decision to buy $600
billion of U.S. government bonds, which weakened the dollar and
spurred commodity prices higher, particularly gold, which has
gained nearly 30 percent this year so far.
Spot gold prices <XAU=> rose $11.25, or 0.80 percent, to
$1420.30 an ounce, while silver <XAG=> touched $28.46 an ounce,
the highest since March 1980, palladium <XPD=> saw $728.22 an
ounce, its highest since April 2001. Platinum <XPT=> hit $1,790
an ounce its highest since July 2008.
U.S. crude oil <CLc1> rose 15 cents, or 0.17 percent, to
$87.21 per barrel, after touching $87.63 its highest since
October 2008 following the release of the International Energy
Agency's long-term energy outlook, in which it said oil prices
might exceed $100 a barrel in 2015 and $200 in 2035.
Meanwhile, U.S. government bond prices fell after data on
U.S. wholesale inventories showed a larger than expected rise,
fueling questions about whether inventories were gathering dust
on shelves.
The benchmark 10-year U.S. Treasury note <US10YT=RR> was
down 6/32, with the yield at 2.5774 percent. The 2-year U.S.
Treasury note <US2YT=RR> was down 1/32, with the yield at
0.4148 percent. The 30-year U.S. Treasury bond <US30YT=RR> was
down 8/32, with the yield at 4.141 percent.
Investors were also watching this week's meeting of Group
of 20 leaders in South Korea, pitched as a chance to prevent a
currency row escalating into a rush to protectionism that could
imperil the global recovery.
There is little sign of consensus and the meeting has been
overshadowed by disagreements over the Fed's quantitative
easing policy.
(Additional reporting by Edward Krudy in New York and Pratima
Desai, Atul Prakash and Maria Golovnina in London; Editing by
Kenneth Barry)
