By Amanda Cooper
LONDON, Jan 7 (Reuters) - The dollar rallied on Monday,
recovering from a slide after last week's poor U.S. jobs data
and helping European equities edge up, while government bond
prices fell.
The recovery in the dollar ahead of a speech on Thursday by
Federal Reserve Chairman Ben Bernanke put pressure on gold and
oil, which tend to benefit from weakness in the U.S. currency.
Friday's monthly U.S. employment report a rise of just
18,000 in the number of workers on non-farm payrolls in
December, worse than the most bearish forecast in a Reuters poll
where the consensus had been 70,000 and the slowest pace of
growth since August 2003.
The data fuelled expectations of a 50 basis point Fed rate
cut at the end of the month rather than a cut of just 25 basis
points, and sparked a sharp sell-off in the dollar and global
equities on Friday.
"The market is possibly hoping that it could get some relief
from Bernanke and the Fed," said Jeremy Stretch, strategist at
Rabobank.
"Also the market may have got a little bit carried away on
Friday post-payrolls, which clearly weren't positive, but they
weren't quite as negative as perhaps the market reacted.
"A combination of all that at least at the moment is
providing a bit of dollar support."
The dollar fell by more than 8 percent against a basket of
major currencies in 2007 as the combination of a global
liquidity crisis, the slowing housing market, record high oil
prices and patchy data cast doubt on the economic outlook.
By 1010 GMT, the dollar index was up half a percent on the
day at 76.261 <.DXY> after falling as low as 75.429 on Friday.
The euro was down 0.5 percent at $1.4672 <EUR=>.
EQUITIES ECHO DOLLAR
European equities <> managed to shrug off widespread
weakness on global stock markets, after shares fell in Asia.
The FTSEurofirst 300 index of top European shares was up 0.4
percent at 1,463.30 points, having pared an earlier 0.4-percent
loss.
The index fell by almost 2 percent on Friday after the U.S.
jobs report, making this its worst daily fall in about a month.
"We've had a huge barrage of very bearish statistics last
week from the U.S. and it's obviously weighing on the market,"
said Edmund Shing, strategist at BNP Paribas in Paris.
"The question this week is: 'are we ready for a short-term
bounce, or are we going to crack through the support levels and
go further down?' My view is that we'll get a small bounce
because we're getting oversold on a number of indices," he said.
On Monday, shares in miners and automakers -- among those
worst hit on Friday by concerns over the outlook for U.S. growth
-- extended losses.
Swiss mining group Xstrata was the worst performer among the
miners, falling nearly 2 pct while Porsche was the biggest loser
among the carmakers. Shares in the German luxury auto maker were
down 1.5 percent.
With equities staging a modest rise, euro zone government
bond prices came under pressure, retreating from Friday's
three-week highs.
Yields on the two-year Schatz <EU2YT=RR> -- often viewed as
the most sensitive to investor thinking on the likely course of
monetary policy -- were at 3.799 percent, compared with 3.749
percent late on Friday.
Fixed income investors expect the European Central Bank to
leave euro zone interest rates at 4 percent at its policy
meeting on Thursday.
But uncertainty over the outlook for the economy will likely
keep short-term bond yields from straying too far from current
levels.
Later on Monday, ECB President Jean-Claude Trichet who holds
a news conference following a meeting of global central bankers
in Basel around 1200 GMT.
Other traditional safe-haven instruments suffered a set-back
as investors booked profits on Friday's payrolls-inspired gains.
Gold <XAU=> last week rose to record highs above $860 an
ounce but by Monday had drifted down to $858.20.
Oil <CLc1>, which also hit lifetime highs last week at $100
a barrel, eased 0.4 percent to $97.52 as concern grew over U.S.
demand in a slowing economy.
In emerging markets, equities <.MSCIEF> fell by more than 1
percent, while bond spreads tightened <11EMJ>.
(Additional reporting by Toni Vorobyova and George Matlock in
London, and Blaise Robinson in Paris; Editing by Ruth Pitchford)
