* Dollar recovers after president of San Francisco Fed
speaks
* Wall Street drops further but Cisco surges on earnings
* Bond prices rise on poor U.S. economic data
* Brent oil settles slightly higher
By Herbert Lash
NEW YORK, May 16 (Reuters) - Global equity markets fell on
Thursday after a regional president of the Federal Reserve said
the U.S. central bank could begin to ease up on its loose
monetary policy this summer, leading the dollar to recover
against the euro.
Equities had traded mostly flat to slightly lower during
most of the session on reports that U.S. housing, labor and
regional business conditions pointed to soft spots in the
American economy.
John Williams, president of the Federal Reserve Bank of San
Francisco, also said the Fed could end its bond-buying program
late this year, citing "good news" on the outlook for jobs.
U.S. equities fell on the remarks, which came late in the
session, pushing the Dow and S&P 500 lower and forcing a retreat
in the Nasdaq, which had been higher on Cisco's earnings.
"Williams' remarks are taken as meaning less stimulus, which
is good for the dollar, but not good for stocks or the euro,"
said Kathy Lien, managing director at BK Asset Management in New
York.
The dollar rebounded against the euro to trade flat
at 1.2886. A moribund equity market pushed lower on the news.
The Dow Jones industrial average was down 42.47
points, or 0.28 percent, at 15,233.22. The Standard & Poor's 500
Index was down 8.31 points, or 0.50 percent, at 1,650.47.
The Nasdaq Composite Index was down 6.37 points, or 0.18
percent, at 3,465.24.
Shares of Cisco Systems Inc (NasdaqGS: CSCO - news) surged 12.6 percent to
$23.89 after the network equipment maker posted a
higher-than-expected quarterly profit and said current-quarter
revenue could increase.
Gold hit a four-week low and declined for a sixth straight
day for the first time in more than four years as investors
spooked by recent price falls favored other assets.
Spot gold prices fell $6.08 to $1,386.20 an ounce.
Data stirred negative sentiment about the U.S. economy.
Factory activity contracted in the mid-Atlantic region in
May, ground-breaking for new homes tumbled in April and new
claims for jobless benefits spiked last week, according to three
separate reports.
Coupled with soft underlying inflation, the data suggested
weak demand as the U.S. economy entered the second quarter. The
data had curbed expectations the Fed would scale back its
asset-buying program, which has bolstered the equity market.
"The data today was broadly weak and overall it drives home
the fact that the economic backdrop remains uneven," said Tom
Porcelli, chief U.S. economist at RBC Capital Markets in New
York.
Ground-breaking for new U.S. homes plummeted more than
expected in April, the Commerce Department said, while the
Federal Reserve Bank of Philadelphia said its index of business
conditions in the U.S. Mid-Atlantic region fell.
The number of Americans filing new claims for unemployment
benefits climbed last week at the fastest pace in six months,
the Labor Department said, confounding analysts' expectations
for a more modest increase.
In other data, the U.S. Consumer Price Index posted the
biggest decline since December 2008, indicating inflation
pressure remains tame and giving the Fed latitude to maintain
its current monetary policy.
MSCI (NYSE: MSCI - news) 's world equity index fell 0.3 percent,
pulled lower by Williams' remarks, while the FTSE Eurofirst 300
index of top European shares edged down 0.02 percent to
close at 1,245.45.
U.S. Treasuries prices advanced and German Bund futures
jumped the most in six weeks as the U.S. data raised worries
about the economy and underscored the lack of price pressures.
The benchmark 10-year U.S. Treasury note was up
17/32 in price to yield 1.8792 percent. German Bund futures
jumped 67 ticks to settle at 145.31, its biggest daily
gain since March 27.
Oil prices had settled by the time Williams' remarks were
released.
Oil prices rose but Brent oil futures remained below $104 a
barrel as the soft U.S. economic data added to a bearish outlook
on demand.
Brent settled 12 cents higher at $103.80 a barrel,
while U.S. oil gained 86 cents to settle at $95.16.
