* Commodities continue retreat, world stocks off 0.5 pct
* US dollar up; euro hit by Portugal auction, bank debt
* Oil tumbles back below $89 a barrel, copper ebbs 2 pct
(Adds ADP labor report; dateline)
By Herbert Lash and Jeremy Gaunt
NEW YORK/LONDON, Jan 5 (Reuters) - World stocks, crude oil
and the euro retreated from early new year highs on Wednesday,
with underlying economic optimism reined in by jitters about
lingering debt woes and uncertainty about economic data.
In a pattern investors say may well be repeated throughout
2011, a burst of new year investor optimism in stocks quickly
fell prey to profit taking and so-called correlation trading
that links moves in one security to the buying or selling of
another.
A slide in commodity prices continued for a second day,
pressuring world equity markets. The fall in commodity prices
may have resulted from the rise in the U.S. dollar and a fall
in the Australian dollar after severe floods in that
country.
Oil, which had only a few days ago looked to be heading to
$100 a barrel again, fell back below $89 a barrel in London.
[]. Prices of both commodities and equities, however,
remained near multi-year highs.
The biggest increase in U.S. private sector jobs since at
least 2001, as reported by ADP Employer Services, supported the
new year optimism, leading bond prices to decline and many
stock markets to trim losses. For details see: []
"You cannot ignore the strength of this report. As a
consequence of this report we are taking our payrolls estimate
higher for sure," said Tom Porcelli, U.S. economist at RBC
Capital Markets in New York.
The Dow Jones industrial average <> was down 27.17
points, or 0.23 percent, at 11,664.01. The Standard & Poor's
500 Index <.SPX> was down 3.56 points, or 0.28 percent, at
1,266.64. The Nasdaq Composite Index <> was down 7.08
points, or 0.26 percent, at 2,674.17.
World stocks as measured by MSCI <.MIWD00000PUS> remained
down 0.6 percent, about the same as before the ADP report and
still within a few points of highs last seen in the third
quarter of 2008.
Europe's FTSEurofirst 300 <> pared losses and was
down 0.5 percent. Earlier, Japan's Nikkei <> closed down
nearly 0.2 percent after hitting a 7-1/2 month closing high on
Tuesday.
A number of market moves were put down to investors
adjusting positions after end-of-year balancing of portfolios.
Investors were also awaiting U.S. jobs data due on Friday
for confirmation that the world's largest economy is
recovering, a key factor in recent equity rallies.
"Growth in the labor market one of the biggest deciding
factors for markets this year, that is why we are seeing
investors a bit cautious ahead of the (jobs) numbers. If the
job figures are good, we could see a push higher," said David
Jones, market strategist at IG Index.
U.S. private employers added 297,000 jobs in December,
triple the median estimate by economists and up from the gain
of 92,000 in November, the ADP report showed on Wednesday.
Commodities were hit hard on Tuesday, with the
Reuters-Jefferies CRB index <.CRB> closing nearly 1.6 percent
down as energy, metals and agricultural investors took profits
on the heady gains made on thin holiday volume over the past
two weeks. []
The sell-off continued in some areas on Wednesday. Copper
futures, for example, fell two percent in London. The
Australian dollar <AUD=> was down about 0.5 percent.
And spot gold <XAU=> fell 1.0 percent to a session trough
at $1,364.90 an ounce, the lowest since Dec. 12.
FIRMER US DOLLAR
The U.S. dollar took some of the blame for the commodities'
slide, holding firm on hopes for U.S. economic recovery.
[]
Market players said the dollar's rise and the partly
related drop in commodities this week have been riven by
position unwinding.
"The move over the past two weeks was somewhat exaggerated,
having taken place in thin liquidity. With liquidity now coming
back on stream, the markets are now reassessing some of the
moves," said Sue Trinh, strategist at RBC Capital Markets.
The dollar index, which measures the greenback's value
against major currencies, rose 1 percent to 80.256 <.DXY>.
The euro dipped 0.6 percent to $1.3145 <EUR=>, with traders
nervy over the higher yields paid by Portugal at its latest
Treasury bill auction on Wednesday [] and reports
about European Union plans to insist in future on senior
creditors accepting writedowns on the debt of ailing EU banks.
[]
(Additional reporting by Atul Prakash, Harpreet Bhal, Kirsten
Donovan and Neal Armstrong)
