(Updates with fresh comment, prices, U.S. markets action,
changes byline, dateline, previous LONDON)
By Daniel Bases
NEW YORK, Jan 7 (Reuters) - U.S. stock prices gyrated on
Monday as investors concerned about a possible U.S. recession
saw a drop in oil and gold prices easing some of those fears.
Following a more than 4.0 percent fall in U.S. stocks last
week, markets globally were back up to full staff after the New
Year holidays, with many investors reviewing the damage before
making new bets for 2008.
Adding to some of the volatility was a brief incident
involving U.S. and Iranian naval ships over the weekend in the
Strait of Hormuz, a major oil shipping route in the Gulf.
After an initial rise, crude oil prices fell $2.56 a barrel
to $95.35 <CLc1> on unseasonably warm U.S. weather and looming
recession concerns. Oil hit a lifetime high last week above
$100 a barrel.
Stock prices in Europe ended unchanged in a choppy session,
while the U.S. dollar gained value as traders trimmed bets
against the greenback on speculation that U.S. inflation may
prevent aggressive cuts in interest rates.
"Overall, we still have concerns about inflation and
inflation expectations," said Ron Simpson, director of currency
research at Action Economics in Tampa, Florida.
U.S. Treasury Secretary Henry Paulson said on Monday the
Bush Administration was considering how to give the economy a
boost as it weathers a housing market decline.
Weak December U.S. jobs data on Friday raised concerns the
U.S. economy may be headed for recession.
"With data on Friday showing unemployment ticking up,
that's probably going to keep investors a little spooked," said
Owen Fitzpatrick, head of U.S. Equity Group at Deutsche Bank
Private Wealth Management in New York.
In stocks, benchmark indexes were up at midsession Monday.
The Dow Jones industrial average <> was up 55.03 points, or
0.43 percent, at 12,855.21. The Standard & Poor's 500 Index
<.SPX> was up 9.56 points, or 0.68 percent, at 1,421.19. The
Nasdaq Composite Index <> was up 13.75 points, or 0.55
percent, at 2,518.40.
In European trading, the FTSEurofirst 300 index <>,
ended up just 0.01 percent at 1457.79. London's FTSE 100 index
<> fell 0.1 percent, recovering from losses of 1.2
percent.
Gold <XAU=> last week rose to record highs just below $870
an ounce but fell back on Monday to $859.30, down $1.50 or 0.17
percent.
In emerging markets, equities <.MSCIEF> fell by more than
1.0 percent, but sovereign dollar-denominated emerging market
debt yield spreads tightened <11EMJ>.
GOVERNMENT DEBT
U.S. Treasuries were slightly mixed after Friday's big fall
in yields in the wake of the dismal U.S. jobs data. The
benchmark 10-year U.S. Treasury note <US10YT=RR> was up 2/32,
with the yield at 3.8669 percent.
"Everyone is watching equities with one eye," said Richard
Schlanger, portfolio manager at Pioneer Investments USA in
Boston. "The market is pricing in for a significant economic
slowdown."
Yields on the two-year Schatz <EU2YT=RR>, often viewed as
the most sensitive to investor thinking on the likely course of
monetary policy in Europe, were at 3.788 percent, compared with
3.749 percent late on Friday, in their first rise for a week.
Fixed income investors expect the European Central Bank to
leave euro zone interest rates at 4.0 percent at its policy
meeting on Thursday.
ECB President Jean-Claude Trichet told officials from the
Group of 10 leading economies in the Swiss city of Basel global
economic growth was expected to remain robust although there
were clear downside risks from the market turmoil of last year,
as well as high commodity prices.
DOLLAR BOUNCE
In currencies, the dollar was up against a basket of major
trading-partner currencies, with the New York Board of Trade's
U.S. Dollar Index <.DXY> up 0.44 percent at 76.204 from a
previous session close of 75.868.
The euro <EUR=> was down 0.43 percent at $1.468 from a
previous session close of $1.4743. Against the Japanese yen,
the dollar <JPY=> was up 0.46 percent at 109.02 from a previous
session close of 108.52.
(Additional reporting by Ellis Mnyandu, Gertrude
Chavez-Dreyfuss and Richard Leong in New York and Jamie
McGeever, Toni Vorobyova and George Matlock, Anshuman Daga and
Amanda Cooper in London)
