GLOBAL MARKETS-Brent crude rallies on Libya output; stocks tick up

Reuters

* U.S. pending home sales slump in September

* Fed meeting could fuel more dollar selling

* S&P 500 ticks up to new record

By Rodrigo Campos

NEW YORK, Oct 28 (Reuters) - Brent crude rose nearly 2percent on Monday after Libya's oil exports dropped, whilestocks were little changed at record highs on expectations thatthe Federal Reserve will keep its loose monetary policy in placethis week.

The U.S. dollar edged up but held close to a nine-month lowagainst a basket of currencies as Fed policy continued todetermine the overall trend.

The Federal Open Market Committee, the Fed's policy-settingarm, is unlikely to make any shift in policy at its two-daymeeting that ends Wednesday as it awaits more evidence of howbadly Washington's recent budget battle hurt the U.S. economy.

Most risk assets rose last week as mixed economic dataconvinced many that the Fed would delay any move to begintrimming its stimulus into next year. With the S&P 500 at arecord high, however, traders are shying away from more largebets.

"The Fed is not going anywhere, which is what caused therally for the last week-and-a-half, but now the market does feela little bit tired, it certainly feels like the market is aheadof where the fundamentals say," said Ken Polcari, director ofthe NYSE floor division at O'Neil Securities in New York.

The Dow Jones industrial average rose 18.96 points or0.12 percent, to 15,589.24, the S&P 500 gained 3.86points or 0.22 percent, to 1,763.63 and the Nasdaq Composite dropped 0.675 points or 0.02 percent, to 3,942.686.

MSCI's world equity index, which tracksshare moves in 45 countries, was up 0.25 percent, marking afourth day of gains as it climbed back toward last week's peak,last seen in January 2008.

The FTSEurofirst 300 closed down 0.14 percent andthe euro zone's blue-chip Euro STOXX 50 lost 0.4percent.

U.S.-dollar denominated Nikkei futures rose 0.9percent.

OIL RISES ON LIBYA, OTHER MARKETS ON FED WATCH

In the oil market, Brent crude hit more than $109 a barrel,bouncing off a more than two-month low, after a drop in Libyanoil exports revived supply concerns. Oil production in the OPECmember dropped after new protests over the weekend at its oilfields and ports.

Brent rose 2.1 percent to $109.20 a barrel and U.S. crude added 0.6 percent to $98.47 a barrel.

The likelihood that Fed cash will keep flowing into thefinancial system for a while supported gold and capped gains onthe U.S. dollar.

The dollar index was up 0.1 percent at 79.302, not far froma near nine-month low of 78.998 touched on Friday. The eurodipped to $1.3792, having touched a high of $1.3832 late lastweek.

The longer the Fed keeps its policy loose, the longer U.S.yields will stay low, making the dollar less attractive.

Spot gold was up 0.2 percent at $1,354.16 an ounce,after hitting a five-week high of $1,356.50. Copper waslittle changed at $7,185.25 a ton.

U.S. Treasuries prices were slightly lower as investors maderoom for this week's $96 billion in longer-dated government debtsupply, with yields hovering near three-month lows.

Bond prices pared an initial decline after a surprisinglyweak reading on U.S. pending home sales revived some safe-havenbids. Analysts, however, downplayed the market's reception tothe disappointing data.

"It's hard to read into the data in the next month or two.They're so skewed," said Justin Lederer, Treasury strategistwith Cantor Fitzgerald in New York.

Data is being taken with a grain of salt as a partialfederal government shutdown in the first half of October isexpected to affect readings.

Benchmark 10-year Treasury notes traded down3/32 in price to yield 2.5124 percent. The 10-year yield toucheda three-month low of 2.471 percent last week in the wake of weak September jobs figures.

View Comments (0)