Gold Falls On Potential Limited Strike On Syria
Global equity markets rose, lifted by a surge on Wall Street, and gold prices eased on Wednesday as investors took in stride a potential limited American military strike against Syria and data from around the globe suggested an improving world economy.
The best monthly U.S. auto sales figures in almost six years, U.S. trade data that suggested a growing economy this quarter and data from Europe and China fueled the optimism.
The dollar hovered near a six-week peak against a basket of currencies as encouraging U.S. manufacturing data on Tuesday reinforced expectations that the Federal Reserve would start to cut back its economic stimulus this month.
Markets showed little reaction to a Fed report that the U.S. economy expanded at a "modest to moderate" pace across most of the country between early July and late August. The Beige Book report was just strong enough to reinforce the prospect of a pullback in monetary stimulus.
Brent crude drifted lower as it appeared a strike against Syria would remain limited, quelling fears of supply disruptions in the Middle East, and gold prices fell below $1,400 an ounce.
A gain of almost 1 percent on Wall Street led share prices in Europe to rebound. MSCI's measure of global equity markets rose 0.6 percent and the pan-European Eurofirst 300 index of leading shares closed 0.2 percent higher.
"People hope there will just be a tactical strike and that's it," said Mark Grant, managing director at Southwest Securities in Fort Lauderdale, Florida. "But there are worries about retaliation and a wider conflict isn't priced into the market."
A second day of stock gains retraced most of last week's Syria-related losses on Wall Street, pushed by auto sales.
The Dow Jones industrial average closed up 96.91 points, or 0.65 percent, at 14,930.87. The Standard & Poor's 500 Index rose 13.31 points, or 0.81 percent, at 1,653.08. The Nasdaq Composite Index gained 36.43 points, or 1.01 percent, at 3,649.04.
Auto sales pointed to the industry's strongest month since just before the start of the 2007-2009 recession. U.S. auto sales were on a pace to post a gain as high as 17 percent in August.
"If these sales numbers are the best in six years, that points to an improving economy and that's helping the market," said Stephen Massocca, managing director at Wedbush Equity Management LLC in San Francisco.
Stocks also were buoyed by U.S. trade data that suggested continued economic growth this quarter. Euro zone businesses had their best month in more than two years in August as orders increased for the first time since mid-2011, while growth in China's services sector hit a five-month high.
The euro pared losses to rise against the dollar, up 0.3 percent at $1.3209, while the dollar index was down 0.24 percent at 82.163.
Oil prices edged lower. While Syria is not a big oil producer, investors worry a U.S. strike against the country could spread unrest in the Middle East and disrupt supplies from the region, which pumps a third of the world's crude.
A potential Syria strike has driven U.S. oil prices to their highest this year and Brent oil to a six-month peak as traders have priced in a supply risk factor.
Brent crude fell 77 cents to settle at $114.91 a barrel. U.S. crude settled $1.31 lower at $107.23 a barrel.
"You're mainly seeing a pullback on the perception that we may not strike Syria and that if we do, Congress will rein in Obama's plans," said Michael Lynch, an oil analyst and president of consultancy Strategic Energy & Economic Research Inc. in Winchester, Massachusetts.
U.S. government debt prices traded near break-even as bargain-minded investors emerged to help stabilize a market that has been on edge over the possibility the Federal Reserve will reduce its bond-buying program.
The benchmark 10-year U.S. Treasury note was down 9/32 in price to yield 2.8966 percent.
In Europe, underlying sentiment for top-rated Bunds remained firm as concern over Syria outweighed this week's forecast-beating European and U.S. manufacturing data, which reinforced bets the Fed would soon pare its bond purchases.
Bund futures closed 12 ticks higher at 139.73, off a session high of 139.96.
Spot gold dropped 1.5 percent to $1,390.61 an ounce.
U.S. Comex gold futures for December settled down $22 an ounce to $1,390.