* Dollar rallies as worries rise over Europe
* Wall St falters as European fiscal worries offsets data
* Oil falls toward $73 a barrel on weak demand outlook
* Bonds gain on fading stocks
(Updates with U.S. markets, changes byline; dateline
previously LONDON)
By Herbert Lash
NEW YORK, Jan 29 (Reuters) - The dollar rose to a
6-1/2-month high against the euro on Friday and U.S. stocks
fell as concerns about the fiscal health of some smaller euro
zone countries curbed investors' appetite for risk.
New that the U.S. economy grew at the fastest pace in more
than six years in the fourth quarter also lifted the dollar,
boosting views the United States was recovering faster than
other developed countries.
Investors remained concerned about the fiscal health of
certain euro zone countries, such as Greece, Spain and
Portugal, helping push the euro below $1.39 for the first time
since early July.For details see: []
The batch of reassuring U.S. economic data and improving
consumer sentiment initially lifted U.S. stocks and crude oil
prices. But rising U.S. fuel stockpiles and expectations that
members of the Organization of Petroleum Exporting Countries
will boost exports helped pushed oil down toward $73 a barrel.
U.S. stocks indexes rose more than 1 percent in morning
trade as the figures on gross domestic product and other data
drove optimism about the economy, but worries about Europe
drove the broader market to lose ground by midday.
"There's a lot of concerns going on as far as the sovereign
debt is concerned in the lot of the nations, specifically in
the euro zone," said David Lutz, managing director of trading
at Stifel Nicolaus Capital Markets in Baltimore.
Before 1 p.m., the Dow Jones industrial average <> was
up 21.84 points, or 0.22 percent, at 10,142.30. The Standard &
Poor's 500 Index <.SPX> was down 0.18 points, or 0.02 percent,
at 1,084.35. The Nasdaq Composite Index <> was down 7.08
points, or 0.32 percent, at 2,171.92.
Investors sold off shares of such technology bellwethers as
Apple Inc <AAPL.O>, Microsoft Corp <MSFT.O> and International
Business Machines Corp <IBM.N>.
European shares notched their biggest one-day gain in three
weeks, with banks recovering some ground lost on worries about
Greece's deficit and on optimism over the U.S. economic data.
[]
The FTSEurofirst 300 <> index of top European shares
rose 1 percent to close at 1,011.89 points, its biggest one-day
gain since Jan 4.
But the index fell 3.3 percent in January, its worst
monthly performance since February 2009.
The U.S. economy grew at a faster-than-expected 5.7 percent
pace in the fourth quarter as businesses made less-aggressive
cuts to inventories and stepped up spending. []
The strong gross domestic product number was largely due to
inventory rebuilding, which is now mostly over, said Nigel
Gault, chief U.S. economist at IHS Global Insight in Lexington,
Massachusetts.
"I don't think it changes the story, which is still likely
to be a relatively subdued recovery by historical standards,"
Gault said.
The euro fell as low as $1.3863 <EUR=>, according to
Reuters data, the lowest since mid-July.
The dollar was up against a basket of major currencies,
with the U.S. Dollar Index <.DXY> up 0.66 percent at 79.422.
Against the yen, the dollar <JPY=> was up 0.61 percent at
90.43.
Greek government bonds saw a bit of a reprieve from a sharp
sell-off this week, despite uncertainty over whether the
European Union would bail out the highly indebted country.
Some short covering ahead of the weekend helped ease the
selling of Greek bonds, traders said.
The 10-year Greek yield <GR10YT=RR> shot up about 100 basis
points this week to a peak of 7.255 percent, making it the
highest-yielding euro zone 10-year paper by a wide margin.
U.S. Treasuries pared earlier losses and rose as the rally
in the U.S. stock market lost steam. []
Benchmark 10-year Treasury notes <US10YT=RR> were up 4/32
in price to yield 3.63 percent.
Crude oil prices also turned south after earlier gains from
the batch of reassuring U.S. economic data and improving
consumer sentiment.
U.S. light sweet crude oil <CLc1> fell 42 cents to $73.22 a
barrel.
China's moves to rein in credit also raised concerns about
the pace of economic growth and oil demand.
"The (GDP) number was being downplayed for days prior to
release. No one expects a repeat next quarter and this number
will only influence the current general skepticism marginally,"
said Mike Fitzpatrick, vice president at MF Global in New
York.
Asia Pacific stocks outside Japan as measured by MSCI
<.MIAPJ0000PUS> fell 2 percent to a two-month low, while
Japan's Nikkei average <> fell 2 percent to a six-week
closing low.
(Reporting by Ellis Mnyandu, Wanfeng Zhou, Richard Leong and
Robert Gibbons in New York; Brian Gorman and Ian Chua in
London; writing by Herbert Lash; Editing by Leslie Adler)
