(Recasts with U.S. market, adds byline; dateline previous
LONDON)
By Herbert Lash
NEW YORK, Feb 21 (Reuters) - Fresh worries about the U.S.
economy kept U.S. stocks under wraps on Thursday and sparked
buying of safe-haven debt as precious metals hit new highs and
the dollar slumped to two-week lows against the euro.
In Europe, stocks managed to close higher as bank shares
rose on expectations of further U.S. interest rate cuts, but
gains were pared late in the day on signs of the struggling
U.S. economy.
Oil pulled back from all-time highs above $100 a barrel on
Wednesday on a rise in crude oil inventories.
Worries that the United States is falling into recession
were reignited with the release of data by the Philadelphia
Federal Reserve showing manufacturing in the mid-Atlantic
region slowed to a seven-year low in February and as an index
of future economic activity declined for a fourth straight
month.
The data sparked expectations that the Federal Reserve will
further cut interest rates at its policy meeting in March.
Interest rate futures markets now have almost fully priced in
another half-percentage-point interest rate cut at the March
meeting, up from an 82 percent chance before the sharp fall in
the Philadelphia Fed's business index. <FEDWATCH>
"This is the problem: you may have your bright spots but
you're going to continue to get bouts of very negative economic
data," said Stephen Massocca, co-chief executive at Pacific
Growth Equities in San Francisco.
"These problems aren't going away any time soon," he said.
"The consumer is going to be crimped for a while. All of that
is going to lead to troubling economic indicators, and those
are going impact stocks."
The Dow Jones industrial average <> was down 75.47
points, or 0.61 percent, at 12,351.79. The Standard & Poor's
500 Index <.SPX> was down 8.05 points, or 0.59 percent, at
1,351.98. The Nasdaq Composite Index <> was down 9.95
points, or 0.43 percent, at 2,317.15.
In a bright spot, shares of Research in Motion Ltd
<RIM.TO><RIMM.O> rose almost 10 percent after the company
lifted its fourth-quarter subscriber outlook to reflect strong
holiday sales of its popular BlackBerry smartphones.
EUROPEAN SHARES RISE WITH NESTLE
In Europe, shares extended gains on results from food
company Nestle <NESN.VX>, the world's largest food company, and
Anglo-Dutch publisher Reed Elsevier <REL.L>.
Nestle was the biggest contributor to the broader European
market's gain, rising 3.49 percent after it shrugged off record
prices for such ingredients as milk and cocoa and posted a 15.8
percent gain in 2007 profits.
Reed Elsevier shares rose 7.45 percent after the company
announced the acquisition of U.S. risk management business
ChoicePoint Inc. for $4.1 billion, including some debt.
"Good results are always what the market needs," said
Howard Wheeldon, senior strategist at BGC Partners.
The FTSEurofirst 300 index <> closed up 0.7 percent
at 1,330.07.
The MSCI main world equity index <.MIWD00000PUS> was up
0.79 percent.
In the U.S. government bond market, the benchmark 10-year
Treasury note gained one full point in price, rallying as the
much weaker-than-expected economic data and slipping U.S.
stocks sparked a safe-haven.
Crude oil futures fell, pressured partly by a
bigger-than-expected rise in crude oil inventories last week in
the United States, the top energy consumer. But the market
remains supported by a tide of investor cash, which helped
drive oil to a new record on Wednesday.
U.S. crude for April delivery <CLc1> was down 20 cents at
$99.50 a barrel by 1612 GMT.
Gold and platinum set historic highs in choppy trade.
Silver hit a 27-year high above $18 an ounce, a spike of 22
percent this year, while palladium jumped more than 9 percent
to a 6-1/2-year high before paring gains.
Spot gold <XAU=> hit a high of $948.60 an ounce and was
quoted at $944.70/945.50 at 1505 GMT, against $934.80/935.60
late in New York on Wednesday.
In currency markets, the euro rose to two-week highs
against dollar at $1.4822, according to Reuters data, but
traded back down to $1.4805 <EUR=>,
More U.S. rate cuts would further erode the dollar's appeal
to global investors, particularly when central banks in Europe
and Australia are keeping rates steady or raising them.
The Philadelphia Fed survey "is a big black eye for dollar
bulls. It's really starting to confirm the notion that the U.S.
economy is slowing considerably," said Boris Schlossberg,
senior currency strategist, at DailyFX.com in New York.
(Additional reporting by Cal Mankowski, Ellen Freilich and
Gertrude Chavez-Dreyfuss in New York, Tamawa Kadoya in
Washington and Jane Merriman, Golnar Motevalli and Atul Prakash
in London; editing by Leslie Adler)
