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Business News/ Market / Stock-market-news/  Stocks cut gains as US legislators support Syria action
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Stocks cut gains as US legislators support Syria action

US stocks trim early gains; Microsoft slumps after Nokia deal; manufacturing sector expands

A file photo of traders working on the floor of the New York Stock Exchange. Photo: Getty Images/AFP (Getty Images/AFP)Premium
A file photo of traders working on the floor of the New York Stock Exchange. Photo: Getty Images/AFP
(Getty Images/AFP)

New York: World stock markets were up slightly on Tuesday but cut gains after the US congressional leaders voiced support for military intervention in Syria, while bond yields rose and the dollar gained on strong US data.

Wall Street stocks rallied at the opening after President Barack Obama said over the weekend that he would seek approval from Congress for a Syria strike, delaying the threat to Middle East stability and oil supplies. The market pulled back after comments from Republican House speaker John Boehner expressing support for action.

“Syria is the key thing facing markets, and stocks don’t know what to expect when there’s geopolitical uncertainty, especially with respect to the Middle East," said Mark Martiak, senior wealth strategist at Premier Wealth/First Allied Securities in New York.

“All you know is that you can expect volatility, and that’s why we’re seeing stocks come off their highs."

Data showing the US manufacturing activity growth hit its fastest pace in more than two years helped the dollar and boosted the US bond yields. The data bolsters expectations the Federal Reserve will begin to reduce bond purchases when it concludes its meeting on 18 September.

The US Congress returns from its summer recess on 9 September, and will vote on authorizing a strike on Syria. While Obama has been pushing Congress to back his plan, passage is by no means certain.

Nancy Pelosi, Democratic leader in the House of Representatives, said she believes Congress will support a resolution authorizing the use of US military force against Syria.

On Wall Street, where markets were closed Monday for the Labor Day holiday, the Dow Jones industrial average was down 19.82 points, or 0.13%, at 14,790.49. The Standard & Poor’s 500 Index was up 1.11 points, or 0.07%, at 1,634.08. The Nasdaq Composite Index was up 7.27 points, or 0.20%, at 3,597.14.

MSCI’s world equity index, which tracks shares in 45 countries, was up 0.2%, while European stocks ended down 0.4%.

Shares of Microsoft fell 5.6% to $31.51 after it announced a $7.2 billion bid for the phone business of once-dominant Finnish manufacturer Nokia. US shares of Nokia shot up 30% to $5.06 in heavy volume.

US Treasury Selloff Resumes

The stronger US data, combined with good data on the manufacturing sector from the eurozone and China published on Monday, caused selling in the US bond market to resume.

The 10-year benchmark US treasury note was down 18/32, its yield at 2.854%.

The yield reached as high as 2.902% earlier, roughly 3 basis points below a 25-month high recorded on 22 August, according to Reuters data.

China’s non-manufacturing purchasing managers’ index dropped slightly to 53.9 last month from July’s 54.1. But it remained solidly in expansion territory and suggested recent government measures are supporting the economy.

Traders expect the Fed to start reducing its $85 billion-a-month stimulus program at its 17-18 September policy meeting unless the US payroll numbers due on Friday fall considerably short of forecasts.

The US dollar jumped to a six-week high against major currencies after the US manufacturing activity data.

While expectations of a reduction in Federal Reserve bond purchases support the dollar, a near-term withdrawal of Fed stimulus would weigh on stocks, particularly those in emerging markets that have come under pressure in recent months on expectations of capital outflows.

The dollar index hit a high of 82.505, its highest since 22 July. It last traded at 82.367, up 0.3% on the day.

Australia’s dollar bounced more than half a cent as its central bank kept interest rates at a record low 2.5%, as expected, on Tuesday.

Oil Gains

Brent crude oil futures rose more than $1 per barrel as the US lawmakers voiced support for military action against Syria. Oil prices also drew support from the improving economic data in the US and China and concerns over crude oil supply.

Brent crude was up $1.38 to $115.71 a barrel. It hit a session high of $115.87. US oil reached $108.25, up 60 cents from Friday’s settlement. There was no Monday settlement for the US benchmark due to the US Labor Day holiday.

Rising crude price helped to lift gold. Spot gold was up 0.8% at $1,405.06 an ounce. Reuters

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Published: 03 Sep 2013, 08:37 PM IST
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