* Oil up nearly 2 pct on dollar, U.S. housing data
* Global stocks turn lower as mixed economic data weighs
* Bonds rise after Fed buys $6.5 bln in government debt
(Updates with U.S. markets activity; changes dateline,
previous LONDON)
By Herbert Lash
NEW YORK, June 16 (Reuters) - The U.S. dollar fell across
the board on Tuesday, pressured by Russia's prodding for a new
global reserve currency, while oil rose on hopes that a rebound
in U.S. housing indicates a stabilizing economy.
But not all investors were convinced that the economy is on
a path to recovery, and global stocks turned lower as the
strong rise in U.S. housing starts was outweighed by a slide in
industrial production.
U.S. Treasury bond prices rose after the Federal Reserve
bought a surprisingly large $6.5 billion in government debt.
Gold rose in Europe as the dollar weakened and also
benefited from its appeal as a hedge against potential
inflation on the upturn in crude prices.
And copper steadied after a two-day sell off but looked
shaky as analysts warned price levels might have exceeded the
fundamentals in the face of mixed economic data.
Concerns that the pace of economic recovery may be more
tepid than initially thought forced a retreat in a broad equity
advance in Europe and the United States.
While U.S. housing starts in May rebounded and producer
prices rose less than expected, suggesting inflation pressures
were muted, another report showed industrial production logged
a steeper-than-expected slide last month.
A Federal Reserve report also said May's capacity
utilization rate for total industry, a measure of slack in the
U.S. economy, slumped to its lowest level on records dating
back to 1967.
"There's just no sign that the economy is picking up," said
Marc Pado, U.S. market strategist at a Cantor Fitzgerald & Co
office in San Francisco.
After 1 p.m., the Dow Jones industrial average <> was
down 76.25 points, or 0.89 percent, at 8,535.88. The Standard &
Poor's 500 Index <.SPX> was down 8.40 points, or 0.91 percent,
at 915.32. The Nasdaq Composite Index <> was down 11.36
points, or 0.63 percent, at 1,805.02.
European shares fell marginally, with weak banking shares
offsetting a rise in defensive sectors. Mixed signals for
economic recovery also pressured European stocks.
The FTSEurofirst 300 index <> of top European shares
fell 0.1 percent to close at 862.41 points.
The mixed bag of data was seen as positive for bonds, a
traditional safe-haven, as it suggested there are ample hurdles
the economy must overcome before the recession can end.
"The Fed bought more than $6 billion in supply today and
that was seen as aggressive, so that combined with the
turnaround in stocks gave (Treasuries) room to move higher,"
said Mary Ann Hurley, vice president of fixed income trading at
D.A. Davidson & Co in Seattle.
The benchmark 10-year U.S. Treasury note <US10YT=RR> rose
6/32 in price to yield 3.69 percent. The 2-year U.S. Treasury
note <US2YT=RR> rose 1/32 in price to yield 1.21 percent.
Peter Kenny, managing director at Knight Equity Markets in
Jersey City, New Jersey, said concerns about the U.S.
government's growing liabilities was weighing on stocks.
"If rates do go higher that is without a doubt the one
impact that will have a global reach for equities," he said.
"Rates are the one factor that could put a real wet blanket on
all equity markets."
The dollar fell on comments by Russian President Dmitry
Medvedev suggesting a need for a global reserve currency other
than the greenback.
"Clearly the largest holders of U.S. Treasuries are
increasingly nervous about the fiscal stability of the U.S.
going forward," said Omer Esiner, senior currency analyst at
Travelex Global Business Payments in Washington.
"That said, I don't think it's to anybody's interest to see
a run on the dollar."
The dollar fell against a basket of major currencies, with
the U.S. Dollar Index <.DXY> off 0.54 percent at 80.721.
The euro <EUR=> was down 1.26 percent at $1.3844. Against
the yen, the dollar <JPY=> was down 2.01 percent at 96.42.
U.S. light sweet crude oil <CLc1> rose 12 cents to $70.74 a
barrel.
Spot gold prices <XAU=> fell $6.20 to $931.70 an ounce.
Asian stocks fell as investors cut their holdings of
riskier assets and bought yen. Japan's Nikkei share average
<> closed 2.9 percent lower, the biggest single-day drop
since March 30. The MSCI index of Asia Pacific stocks outside
Japan <.MIAPJ0000PUS> fell 1.8 percent,
(Reporting by Ellis Mnyandu, Gertrude Chavez-Dreyfuss and
Matthew Robinson in New York; Rebekah Curtis and Humeyra Pamuk
in London; Writing by Herbert Lash; Editing by Leslie Adler)
