(Recasts with U.S. markets, changes byline; dateline previous
LONDON)
* Dollar falls as U.S. consumer confidence slides
* Bonds extend gains after fall in consumer confidence
* Oil rises on Iran tensions, fears of Nigeria strike
* Surges in financial shares lifts U.S. equity markets
By Herbert Lash
NEW YORK, June 24 (Reuters) - The dollar fell and U.S.
government debt prices rose on Tuesday after data in both
Europe and the United State showed consumers becoming more
disheartened by rising energy costs.
Crude oil futures were slightly higher at more than $136 a
barrel after a sharper earlier advance dissipated when Iran
denied a market rumor of an attack on its nuclear facilities.
U.S. stocks initially extended losses after the consumer
confidence report and the data that showed U.S. housing prices
suffered record annual drops in April. But a rebound in
recently battered financial shares helped push the Dow and
broad S&P 500 into positive territory after midday.
European stocks also trimmed losses late in the session as
banks recovered minutes before the closing bell, but worries
over the U.S. economy kept the overall market in the red.
Trading volumes remained thin as investors waited to see
what the Federal Reserve says on Wednesday at the conclusion of
its regular two-day policy meeting. The U.S. central bank is
expected to leave rates on hold at 2 percent, ending a string
of cuts aimed at blunting the impact of the credit crisis.
Markets have been worried that the Fed has little room to
maneuver with inflation still a problem and the economy weak.
The economic worries were heightened as the Conference Board's
report on consumer sentiment, as well as housing data from
Standard & Poor's/Case-Shiller, suggested a likely retrenchment
in American spending, which could keep a squeeze on economic
growth.
U.S. home prices in April extended their record slump in
annual terms, although the pace of declines ebbed month over
month, though it did not provide much comfort for investors.
"Worries over a slowdown have spread from financial market
professionals to people in the real economy, and it confirms
what the market has been fearing for a while," said Jean-Claude
Petit, head of equities at Barclays Wealth Managers France.
Financial stocks are down about 12 percent so far in June, according to the S&P financial index <.GSPF>. Many large U.S.
bank stocks are trading at decade lows.
Before 1 p.m. the Dow Jones industrial average <> was
up 31.02 points, or 0.26 percent, at 11,873.38. The Standard &
Poor's 500 Index <.SPX> was up 4.68 points, or 0.36 percent, at
1,322.68. The Nasdaq Composite Index <> was up 0.10
points, or 0.00 percent, at 2,385.84.
Wall Street data:
The FTSEurofirst 300 <> index of top European shares
ended 0.7 percent lower, at 1,214.25 points, its lowest close
since mid-March. The index has lost about 9 percent so far in
June.
Banks in Europe staged a late recovery, with Royal Bank of
Scotland <RBS.L> up 2.2 percent, Barclays <BARC.L> up 3.7
percent and BNP Paribas <BNPP.PA> up 2 percent.
The weakness in equities boosted bonds as investors pulled
assets from riskier investments and turned to the perceived
lower risk of government debt.
The benchmark 10-year U.S. Treasury note <US10YT=RR> rose
10/32 to yield 4.13 percent. The 30-year U.S. Treasury bond
<US30YT=RR> rose 14/32 to yield 4.67 percent.
In European debt markets, stronger-than-expected French
data upset Bunds in early trading. But a lower open on Wall
Street, after a profit warning from package delivery company
United Parcel Service <UPS.N>, stirred worries about the U.S.
economy as did U.S. consumer confidence.
"The story has been the slide in equity markets and the
consequent rebound in interest rate markets. It's been a
continued day of pessimism that hasn't just hit the euro zone,"
said Investec economist David Page.
The euro hit a session high of $1.5621 <EUR=> after the
consumer confidence data also showed expectations of future
prosperity were at an all-time low.
The dollar fell against major currencies, with the U.S.Dollar Index <.DXY> down 0.31 percent at 73.208. Against the
yen, the dollar <JPY=> rose 0.09 percent at 107.89.
The euro <EUR=> gained 0.41 percent at $1.5587.
Analysts said that complicates matters for the Fed as it
tries to prevent the U.S. economy from slipping into recession
while also grappling with rapidly rising inflation.
"No doubt, this complicates life for the Fed," said Boris
Schlossberg, senior currency strategist at DailyFX.com in New
York. "If the U.S. consumer is indeed crumbling, does the Fed
really have the power to raise interest rates at what looks
like the beginning of a nasty little recession?"
Gold ticked higher as the dollar's softening against the
euro and firm oil prices encouraged buyers. After the plunge on
Monday the strong interest in gold cheered the market.
"There is growing optimism that the inflows we are seeing
into exchange-traded funds and underlying physical demand are
actually improving," said metals strategist Daniel Hynes and
Merrill Lynch.
Tension over Iran's nuclear programme has played a big part
in oil's rise to record levels near $140 a barrel.
U.S. light sweet crude oil <CLc1> rose 12 cents to $136.86
per barrel.
Spot gold prices <XAU=> rose $4.95 to $888.30 an ounce.
Surging energy costs in Asia coincided with signs of a
global economic slowdown overnight in Asian markets, a bad omen
for a region that relies on exports to help fuel profits.
Tokyo's Nikkei average <> closed flat.
The MSCI index of Asian stocks outside Japan
<.MIAPJ0000PUS> inched down 0.1 percent, after at one point
hitting its lowest since late March.
(Reporting by Ellis Mnyandu, Steven C. Johnson and Chris
Reese; and Jane Merriman, Jan Harvey and Kirsten Donovan in
London and Blaise Robinson in Paris)
(Reporting by Herbert Lash. Editing by Richard Satran)
