GLOBAL MARKETS-Stocks little changed, euro dip before German ruling, Fed

12:59 |


* S&P 500 stock index hovers near four-year high
* Talk of Fed easing after weak U.S. jobs report curbs downside
* Euro off four-month high; German court decision due Wednesday
China imports slip from year ago
By Ellen Freilich
NEW YORK, Sept 10 (Reuters) - U.S. stocks were little changed on Monday while the euro dipped below four-month highs before potential new stimulus from the U.S. Federal Reserve and the European Central Bank.
Markets are waiting for the Fed's decision at the end of its two-day policy meeting on Thursday and, a day earlier, for a German constitutional court to rule on whether Germany may contribute to the euro zone's rescue fund, a crucial part of the ECB's plan to contain the borrowing costs of Spain and Italy.
On Wall Street, the Dow Jones industrial average was up 14.23 points, or 0.11 percent, at 13,320.87. The Standard & Poor's 500 Index was up 0.02 points, or 0.00 percent, at 1,437.94. The Nasdaq Composite Index was down 11.65 points, or 0.37 percent, at 3,124.77.
"We had a pop last week we haven't really given up on yet and the principal reason is because people, in the back of their minds, still feel as though there is going to be some move taken by the Fed to support the lagging numbers," said Peter Kenny, managing director at Knight Capital in Jersey City, New Jersey.
The benchmark 10-year U.S. Treasury note was down 2/32, its yield at 1.68 percent.
Dutch elections on Wednesday could also affect investors' outlook if voters in the Netherlands elect a government that is less committed to the euro currency union.
Stocks moved to four-year highs last week after the ECB said it was prepared to buy an unlimited amount of bonds. That news also pushed European shares to a 13-month high, and the euro to a four-month peak. The euro slipped 0.16 percent against the dollar on Monday.
On Monday, the MSCI index of top global shares was down 0.03 percent. Stock markets in London and Paris were slightly lower while stocks in Frankfurt were flat to lower.
Analysts said data from China pointing to slower growth weighed on U.S. stocks. Chinese imports fell 2.6 percent on the year in August, confounding expectations for a 3.5 percent rise.
But talk of more monetary easing from the Federal Reserve, which meets this week, curbed losses.
The euro was down 0.1 percent at $1.2794, still near Friday's high of $1.2817, its strongest since May.
The benchmark S&P 500 index rose 2.2 percent last week, its biggest weekly gain in three months, on increasing expectations for more stimulus measures, as a weaker-than-forecast U.S. jobs report on Friday served to further boost those expectations.
American International Group Inc fell 1.5 percent to $33.47 after the U.S. Treasury Department said it will sell most of its stake in the insurer, making the government a minority investor for the first time since it rescued the company in the depths of the financial crisis four years ago.
In the U.S. Treasury market, 30-year bonds underperformed as investors bet a third bond purchase program in the United States would stoke higher inflation expectations.
The Fed is seen likely to launch a new quantitative easing program when it meets this week as it struggles with a sluggish U.S. economy with a stubbornly high jobless rate.
Gold stayed near six-month highs after last week's softer U.S. jobs report heightened expectations for more monetary easing from the Fed.
Spot gold was unchanged at $1,731.51 an ounce, having risen last week by 2.7 percent, its third straight weekly gain and its longest stretch of gains since the start of the year.
Since the Fed first used QE as a means to encourage growth in late 2008, gold has more than doubled in value, hitting a record $1,920.30 an ounce last September.
Deutsche Bank analysts expect the gold price to average $1,726 an ounce this year, before rallying to $2,000 early next year, making their outlook one of the more bullish from a Reuters mid-year price survey in July.
Expectations of further Fed action have increased since Chairman Ben Bernanke said in a speech at Jackson Hole, Wyoming last Friday that high unemployment is a "grave concern," and that the bank would act as needed to strengthen the economic recovery.
"The Fed is looking for a much more substantial improvement in the labor market," said Zach Pandl, interest rate strategist at Columbia Management. "It's difficult for Treasury yields with the economic environment supportive for Fed easing."
In oil markets, Brent crude futures for October delivery were up 0.26 percent at $114.55 per barrel after settling up 76 cents on Friday. U.S. crude was down 0.25 percent at $96.17 per barrel.

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