GLOBAL MARKETS-Stocks cut gains as U.S. legislators support Syria action
* U.S. stocks trim early gains; Microsoft (NasdaqGS: MSFT - news) slumps after Nokia (Xetra: 870737 - news)
deal
* Treasury bond selling resumes
* U.S. manufacturing sector expands
* U.S. dollar hits six-week high
By Caroline Valetkevitch
NEW YORK, Sept 3 (Reuters) - World stock markets were up
slightly on Tuesday but cut gains after U.S. congressional
leaders voiced support for military intervention in Syria, while
bond yields rose and the dollar gained on strong U.S. data.
Wall Street stocks rallied at the opening after President
Barack Obama said over the weekend that he would seek approval
from Congress for a Syria strike, delaying the threat to Middle
East stability and oil supplies. The market pulled back after
comments from Republican House Speaker John Boehner expressing
support for action.
"Syria is the key thing facing markets, and stocks don't
know what to expect when there's geopolitical uncertainty,
especially with respect to the Middle East," said Mark Martiak,
senior wealth strategist at Premier Wealth/First Allied
Securities in New York.
"All you know is that you can expect volatility, and that's
why we're seeing stocks come off their highs."
Data showing U.S. manufacturing activity growth hit its
fastest pace in more than two years helped the dollar and
boosted U.S. bond yields. The data bolsters expectations the
Federal Reserve will begin to reduce bond purchases when it
concludes its meeting on Sept. 18.
The U.S. Congress returns from its summer recess on Sept. 9,
and will vote on authorizing a strike on Syria. While Obama has
been pushing Congress to back his plan, passage is by no means
certain.
Nancy Pelosi, Democratic leader in the House of
Representatives, said she believes Congress will support a
resolution authorizing the use of U.S. military force against
Syria.
On Wall Street, where markets were closed Monday for the
Labor Day holiday, the Dow Jones (DJI: ^DJI - news) industrial average was
down 19.82 points, or 0.13 percent, at 14,790.49. The Standard &
Poor's 500 Index was up 1.11 points, or 0.07 percent, at
1,634.08. The Nasdaq Composite Index was up 7.27 points,
or 0.20 percent, at 3,597.14.
MSCI (NYSE: MSCI - news) 's world equity index, which tracks
shares in 45 countries, was up 0.2 percent, while European
stocks ended down 0.4 percent.
Shares of Microsoft fell 5.6 percent to $31.51
after it announced a $7.2 billion bid for the phone business of
once-dominant Finnish manufacturer Nokia (Stockholm: NOKI-SEK.ST - news) . U.S. shares
of Nokia shot up 30 percent to $5.06 in heavy
volume.
U.S. TREASURY SELLOFF RESUMES
The stronger U.S. data, combined with good data on the
manufacturing sector from the eurozone and China published on
Monday, caused selling in the U.S. bond market to resume.
The 10-year benchmark U.S. Treasury note was
down 18/32, its yield at 2.854 percent.
The yield reached as high as 2.902 percent earlier, roughly
3 basis points below a 25-month high recorded on Aug. 22,
according to Reuters data.
China's non-manufacturing purchasing managers' index dropped
slightly to 53.9 last month from July's 54.1. But it remained
solidly in expansion territory and suggested recent government
measures are supporting the economy.
Traders expect the Fed to start reducing its $85
billion-a-month stimulus program at its Sept. 17-18 policy
meeting unless U.S. payroll numbers due on Friday fall
considerably short of forecasts.
The U.S. dollar jumped to a six-week high against major
currencies after U.S. manufacturing activity data.ID:nL2N0GZ0V9]
While expectations of a reduction in Federal Reserve bond
purchases support the dollar, a near-term withdrawal of Fed
stimulus would weigh on stocks, particularly those in emerging
markets that have come under pressure in recent months on
expectations of capital outflows.
The dollar index hit a high of 82.505, its highest since
July 22. It last traded at 82.367, up 0.3 percent on the
day.
Australia's dollar bounced more than half a cent as
its central bank kept interest rates at a record low 2.5
percent, as expected, on Tuesday.
OIL GAINS
Brent crude oil futures rose more than $1 per barrel as U.S.
lawmakers voiced support for military action against Syria. Oil
prices also drew support from the improving economic data in the
United States and China and concerns over crude oil supply.
Brent crude was up $1.38 to $115.71 a barrel. It hit
a session high of $115.87. U.S. oil reached $108.25, up
60 cents from Friday's settlement. There was no Monday
settlement for the U.S. benchmark due to the U.S. Labor Day
holiday.
Rising crude price helped to lift gold. Spot gold was
up 0.8 percent at $1,405.06 an ounce.