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GLOBAL MARKETS-U.S. stocks rise on AES news, dollar falls

Published 09/14/2009, 05:04 PM
Updated 09/14/2009, 05:06 PM
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* Wall Street rebounds after news of AES and China

* Dollar falls to lowest level this year versus euro

* Mild profit-taking seen after five-week rally in bonds

* Oil falls, traders eye position limits, China (Updates with close of U.S. markets)

By Herbert Lash

NEW YORK, Sept 14 (Reuters) - U.S. stocks rose on Monday, helped by news that China's sovereign wealth fund is eyeing a stake in U.S. power company AES Corp , while the dollar fell to a 2009 low against the euro on revived risk appetite.

Oil fell, weighed down by concerns that position limits on commodities could be tightened, and about a U.S. decision to impose special duties on Chinese tires. [ID:nLE706587]

The benchmark S&P 500 <.SPX> and the Dow edged higher, erasing earlier losses sparked by fears that the U.S.-Sino dispute could escalate into a global trade row.

"It's the whole risk-on, risk-off story back again," said Jacob Oubina, currency strategist at Forex.com in Bedminster, New Jersey. "We had risk come off a little bit overnight with the China-U.S. trade news. Now the S&P is managing to eke out a rally here and that's keeping the euro supported."

Some traders said the spat was an excuse to take profit after a sharp run-up in asset prices. U.S. government debt retreated, pulling benchmark yields up from two-month lows, after a five-week rally. [ID:nN14587409]

U.S. gold futures finished at moderately lower levels as investors decided to take profits after a swift run up last week. But prices held above $1,000 an ounce. [ID:nN14572321]

Shares of AES rose 4.5 percent and the S&P utilities index <.GSPU> gained 1.6 percent after The Wall Street Journal said China's sovereign wealth fund was seeking a minority stake, according to people familiar with matter. [ID:nBNG507167]

"M&A activity is definitely starting to heat up. (The AES news) sparked interest in the whole utility sector," said Owen Fitzpatrick, head of U.S. Equity Group at Deutsche Bank Private Wealth Management

The Dow Jones industrial average <.DJI> was up 21.39 points, or 0.22 percent, at 9,626.80. The Standard & Poor's 500 Index <.SPX> was up 6.61 points, or 0.63 percent, at 1,049.34. The Nasdaq Composite Index <.IXIC> was up 10.88 points, or 0.52 percent, at 2,091.78.

The tire dispute could open the door for a host of trade complaints against China and raised tension between the two economic powers ahead of the G20 meeting, pressuring U.S. stock markets. [ID:nSP459289]

U.S. crude , which has been looking to stocks and macroeconomic data for signs of a turnaround in the economy and weak fuel demand, fell 43 cents to settle at $68.86 a barrel.

London Brent crude traded down 25 cents to settle at $67.44 a barrel.

The euro was up 0.4 percent on the day at $1.4622, rebounding from a session low of $1.4514. It climbed as high as $1.4652, its highest level since December 2008, according to Reuters data.

"The markets might jump to the conclusion that this is a protectionist measure but I suspect the markets are just looking for an excuse to take some profits," said Mike Lenhoff, strategist at Brewin Dolphin.

"The markets are looking for a breather and it is nothing more than that. It's just another ordinary day on the market," said Lenhoff.

The benchmark 10-year U.S. Treasury note was down 20/32 to yield 3.42 percent.

John Canavan, market analyst at Stone & McCarthy Research Associates in Princeton, New Jersey, said the bond market was "positioned for profit-taking" at the start of the week after last week's rally.

"The improvement in stocks let the bond market to move in the direction it was already leaning in," Canavan said.

MSCI's all-country world stock index <.MIWD00000PUS> was down 0.2 percent, paring earlier losses of almost 1 percent, but still on track to break a seven-session winning streak that lifted the index to 11-month highs last week.

MSCI's emerging market index <.MSCIEF> also pared losses, but was still off 1.0 percent.

December gold was down $5.30 at the close at $1,001.10 an ounce in New York.

Japan's Nikkei average <.N225> shed 2.3 percent, while the MSCI index of Asia-Pacific stocks outside Japan <.MIAPJ0000PUS> slipped 1.5 percent. (Reporting by Caroline Valetkevitch, Wanfeng Zhou, Matthew Robinson and Ellen Freilich in New York and Joanne Frearson in London; Writing by Herbert Lash; Editing by Diane Craft)

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