(Adds close of U.S. markets)
* Oil eases from new high, Saudi poised to boost output
* Dollar falls as euro zone inflation scales record peak
* Bonds fall on doubts Fed is ready to start raising rates
By Herbert Lash
NEW YORK, June 16 (Reuters) - Oil prices eased on Monday
after a surge to a record high of almost $140 a barrel stoked
inflation worries, and the dollar fell against the euro on a
drop in a key U.S. regional manufacturing index and record
inflation in the euro zone.
U.S. tech stocks rose, helping lift the Nasdaq, but the Dow
industrials ended lower, hurt by brokerage downgrades of some
key components and as food stocks fell on surging costs.
The Federal Reserve Bank of New York's "Empire State" index
showed manufacturing in the state shrank in June for the fourth
time in five months, casting doubt on the health of the
sluggish U.S. economy.
The data diminished expectations of a Fed rate hike and
weakened the dollar versus the euro as record annual inflation
in the euro zone all but sealed the case for interest rate hike
by the European Central Bank in July.
Doubts that the Fed will boost interest rates any time soon
drew buyers of U.S. government debt after a week of
price-cutting.
Crude oil <CLc1> hit a record high of $139.89 a barrel,
before paring gains to settle down 25 cents to $134.61 in New
York as Saudi Arabia, the world's top producer, appeared poised
to boost production to the highest level in decades. London
Brent crude <LCOc1> fell 40 cents to $134.71.
Brokerage downgrades of blue chips General Electric <GE.N>,
AT&T Inc <T.N> and Verizon <VZ.N> contributed to a slide in the
blue-chip Dow and dragged on the broad-based Standard & Poor's
500 Index.
A 1.5 percent rise in the Philadelphia semiconductor index
<.SOXX> helped lift the Nasdaq. BlackBerry maker Research in
Motion <RIMM.OQ> was one of the top-weighted gainers, with
shares gaining 6.0 percent after analysts said that Nokia's new
phone models would not pose a threat to RIM's dominance of the
business market.
Benchmark indexes closed mixed. The Dow Jones industrial
average <> fell 38.27 points, or 0.31 percent, at
12,269.08. The Standard & Poor's 500 Index <.SPX> added 0.11
points, or 0.01 percent, at 1,360.14. The Nasdaq Composite
Index <> rose 20.28 points, or 0.83 percent, at 2,474.78.
U.S. banking shares rose, lifted by investment bank Lehman
Brothers Holdings Inc <LEH.N>, whose chief executive expressed
confidence even the investment bank posted a $2.8 billion
quarterly loss, which was in line with a previously revised
forecast. Lehman shares rose 5.4 percent.
Shares of beverage makers Coca-Cola <KO.N> and PepsiCo
<PEP.N> fell on fears that floods in the Midwest would drive up
prices of corn syrup, a soda sweetner. Coca-Cola shares fell
2.2 percent, while PepsiCo shares lost 2.2 percent.
Worries that higher corn prices will affect feed costs also
drove down shares of Pilgrim's Pride Corp <PPC.N> , the largest
U.S. chicken producer, down 8.4 percent, and Smithfield Foods
Inc <SFD.N>, down 5.2 percent.
European shares also were lower, although banks were the
worst-performing sector in European markets.
The FTSEurofirst 300 index <> of top European shares
fell 0.4 percent to 1,262.92 points, having fallen earlier by
as much as 1.1 percent.
Credit Suisse <CSGN.VX> fell 0.5 percent, Deutsche Bank
<DBKGn.DE> lost 1 percent and Santander <SAN.MC> fell 1.6
percent.
Barclays <BARC.L> featured among the day's main gainers,
rising by as much as 12.6 percent at one point, after saying it
planned to sell billions of pounds of shares to new and
existing shareholders. The bank ended up 3.5 percent.
U.S. government debt rose after the report on weak New York
state manufacturing and inklings of doubt grew as to whether
the Federal Reserve was ready to raise interest rates.
Encouraging those doubts was a Robert Novak column in The
Washington Port asserting that market speculation about higher
interest rates appeared to be "dead wrong."
The Novak column helped bond prices, said Andrew Brenner,
senior vice president and co-head of structured products and
emerging markets at MF Global in New York.
U.S. Treasury debt prices were mixed.
The benchmark 10-year U.S. Treasury note <US10YT=RR> fell
2/32 to yield 4.27 percent. The 30-year U.S. Treasury bond
<US30YT=RR> rose slightly to yield 4.79 percent.
The dollar fell against major currencies, with the U.S.
Dollar Index <.DXY> down 0.40 percent at 73.631. Against the
yen, the dollar <JPY=> fell 0.03 percent at 108.12 after
hitting a four-month high at 108.85 yen earlier in the day.
The euro <EUR=> rose 0.63 percent at $1.5476.
Crude oil eased as Saudi Arabia appeared poised to boost
production to halt a record rally that has threatened global
economic growth.
"After today's rally to near $140, people are reassessing
the situation, noting that we may be getting more barrels from
OPEC and mindful that the Saudis are hosting a summit of
producers and consumers this weekend," said Andy Lebow, oil
analyst at MF Global in New York.
Gold ended higher as the dollar fell and hawkish ECB
comments increased bullion's appeal.
Silver prices jumped more than 5 percent, tracking gold, to
a session high of $17.40 an ounce.
Gold <XAU=> last traded at $883.60/884.80 in New York.
Earlier in Asia, Japan's Nikkei share average <>
closed 2.7 percent higher with the yen near a four-month low
against the dollar.
(Reporting by Jennifer Coogan Lucia Mutikani, Ellen Freilich
and Jan Harvey, Amanda Cooper, Jane Merriman and Ikuko Kao in
London; Editing by Leslie Adler)
