* US dollar rises on euro zone weakness, higher yields
* US Treasury bonds fall amid sell-off before year-end
* U.S. stocks ease despite mergers and acquisitions talks
(Updates with U.S. markets' close, Nikkei futures)
By Manuela Badawy
NEW YORK, Nov 15 (Reuters) - The U.S. dollar climbed to a
six-week high against major currencies on Monday as worries
about Ireland's debt crisis persisted, hurting the euro, while
rising U.S. bond yields increased the greenback's appeal.
Global equity markets ended little changed to slightly
lower as concerns the Federal Reserve may scale back efforts to
stimulate the economy muted optimism over two big takeover
bids.
A rise in the 10-year U.S. Treasury note's yield to a
three-month high also buoyed the dollar, as bond investors
unwound positions taken in advance of the Federal Reserve's
second program of long-term purchases of government debt.
Concerns about Ireland's ability to repay its debt and that
its problems may spread throughout the euro zone rekindled the
dollar's appeal as a safe-haven.
"The euro fell below $1.36 and is set to remain under
pressure in the near term as investors focused on fiscal
troubles in Ireland and Portugal and await meetings of European
finance ministers on Tuesday and Wednesday," said Greg
Farinella, managing director and head of Treasury and trading
at Espirito Santo Investment S.A. in New York.
"The issues in Europe have been very focal the last couple
of days and that's lending itself to euro weakness."
News that a group of Republican economists and financial
services executives will launch a campaign this week urging the
Fed to drop the plan to buy $600 billion of Treasuries spurred
a rise in government bond yields and boosted the dollar.
Helping to motivate the sell-off in U.S. debt was the
rationale that the economy could improve soon, making further
large-scale asset purchases by the Fed -- after the $600
billion it committed to buy at its November policy meeting --
unnecessary.
The rise in U.S. yields has enhanced the appeal of
dollar-denominated assets.
The U.S. Dollar Index <.DXY>, which measures the dollar's
performance against a basket of major currencies, rose 0.69
percent to 78.619 after earlier rising as high as 78.629. It
has now recouped all losses made after the Fed's Nov. 3
announcement of a second round of quantitative easing.
The euro <EUR=> fell 0.77 percent to $1.3585, while the
dollar gained 0.82 percent to 83.28 yen <JPY=>, touching a
five-week high as U.S. Treasury yields surged.
Investors sold the euro as Ireland struggled to convince
them it was in control of its debt problems, leaving open the
possibility of a bailout. [] The euro has taken a
hit in the past week as Irish bond yields have jumped on the
country's struggles to control its spiraling debt.
The debt-laden country is fully funded for 2010, but Irish
press reports said on Monday it was considering asking for
money for its banks, and other European governments were keen
to avoid a contagion to other peripheral countries.
"A lot of this is going to depend on how severe this whole
euro-zone crisis becomes. Everybody is really focused on the
Wednesday meeting with euro-zone finance ministers," said Boris
Schlossberg, director of currency research at GFT in New York.
"If they can't come up with some tangible resolution to the
Irish problem, then the dollar definitely gets the benefit
risk-aversion flows," he added.
U.S. data showed U.S. retailers' sales rose more than
expected in October, suggesting the economic recovery was on
track. But a separate report showed an index of manufacturing
in New York state fell in November to its lowest since April
2009 after new orders and shipments tumbled. []
and [].
STOCKS LOSE STEAM
U.S. stocks ended slightly lower as the energy and
materials sectors, which are sensitive to commodity prices and
weaken when the dollar rises, led the way down as the Treasury
market sell-off picked up steam in the afternoon.
The Dow Jones industrial average <> ended up 9.39
points, or 0.08 percent, at 11,201.97. The Standard & Poor's
500 Index <.SPX> fell 1.46 points, or 0.12 percent, at
1,197.75. The Nasdaq Composite Index <> closed down 4.39
points, or 0.17 percent, at 2,513.82.
M&A activity kept the market afloat for most of the day
after Caterpillar Inc <CAT.N> agreed to buy mining equipment
maker Bucyrus International Inc <BUCY.O> for $7.6 billion and
data storage equipment maker EMC Corp <EMC.N> inked a deal to
buy smaller rival Isilon Systems Inc <ISLN.O> for $2.25
billion.
The FTSEurofirst 300 index<> of top European shares
gained 0.75 percent after falling for three straight sessions.
European stocks rallied on news that German truck maker MAN SE
<MANG.DE> and Sweden's Scania <SCVb.ST> were in talks over a
possible merger, in a move that could result in Volkswagen
<VOWG.DE> taking full control of both. []
The December futures contract for the Nikkei 225 stock
index <0#NK:> trading in Chicago fell 25 points to 9860.
MSCI's all-country world stock index <.MIWD00000PUS> fell
0.1 percent.
Persistent concerns that China will raise interest rates
further also spurred selling of riskier assets as traders
worried policy tightening will curb the robust demand of the
the world's second-largest economy for commodities and other
imports.
The U.S. 30-year Treasury bond lost 2 points in late
trading as dealers exited bets they had put on the Federal
Reserve's $600 billion bond purchase program, dubbed QE2.
The 30-year bond <US30YT=RR> traded as low as 97-10/32 in
price and its yield was as high as 4.41 percent, a level not
seen since mid-May, according to Reuters data.
The benchmark 10-year U.S. Treasury note <US10YT=RR> fell
47/32, with the yield at 2.9575 percent. The 2-year U.S.
Treasury note <US2YT=RR> fell 2/32, with the yield at 0.5399
percent.
The Fed on Monday bought $7.92 billion in Treasury debt
maturing between September 2016 and November 2017. On Friday,
the Fed bought $7.23 billion in Treasury paper maturing in four
to six years.
In energy and commodity markets, U.S. crude oil futures
<CLc1> fell 26 cents, or 0.31 percent, to $84.62 per barrel,
and spot gold <XAU=> fell $8.94, or 0.65 percent, to $1359.40
an ounce.
Gold's drop from last week's record $1,424.10 an ounce was
on concern the market had become overbought and as talk of a
potential Chinese interest-rate rise knocked commodity prices
sharply lower.
(Additional reporting by Leah Schnurr, Richard Leong,
Wanfeng Zhou and Gertrude Chavez-Dreyfuss in New York; Editing
by Dan Grebler)
