Dollar gains on GDP, pushing oil, stocks lower

NEW YORK Thu Nov 7, 2013 11:46pm IST

Twitter CEO Dick Costolo takes a photo as Twitter begins to trade during the IPO on the floor of the New York Stock Exchange in New York, November 7, 2013. REUTERS/Brendan McDermid

Twitter CEO Dick Costolo takes a photo as Twitter begins to trade during the IPO on the floor of the New York Stock Exchange in New York, November 7, 2013.

Credit: Reuters/Brendan McDermid

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NEW YORK (Reuters) - Stronger-than-expected U.S. economic growth, coupled with a surprise interest rate cut by the European Central Bank, pushed the dollar up and crude oil prices down on Thursday.

The ECB's unexpected move also caused equity markets to retreat after earlier gains.

The euro fell 1 percent against the dollar to a more than seven-week low after the ECB cut rates to a record low and said it would prime banks with liquidity into 2015 to keep the euro zone's recovery from stalling as inflation tumbles.

Adding to the dollar's strength was data showing the American economy grew in the third quarter at the quickest pace in a year, while U.S. jobless claims fell in the latest week. The data supported the case for a cutback in stimulus by the Federal Reserve later this year.

Brent oil prices fell below $104 a barrel on the stronger dollar, while plentiful crude supplies and continued progress in talks between Iran and the West over Tehran's disputed nuclear program also weighed on oil prices.

U.S. oil slipped 37 cents to $94.43 a barrel.

Stocks tied to the energy sector fell, but later pared early losses, with the PHLX Oil Service Sector Index declining 0.23 percent and the S&P Energy Index down 0.39 percent.

"This morning's GDP report sent the dollar surging, and anything commodity-based that was dollar-related just turned and headed south," said Paul Mendelsohn, chief investment strategist at Windham Financial Services in Charlotte, Vermont.

"That just rolled over into the rest of the (stock) market, so I think you should blame it on the stronger dollar," he said.

Twitter Inc (TWTR.N) shares soared 92 percent in their first day of trading. The shares opened at $45.10 after pricing at $26 a share on Wednesday, and rose as high as $50.

MSCI's all-country world stock index fell 0.60 percent, while the pan-European FTSEurofirst 300 index .FTEU3 of leading regional shares pared gains to close up 0.03 percent at 1,296.95.

On Wall Street, the Dow Jones industrial average was down 19.30 points, or 0.12 percent, at 15,727.58. The Standard & Poor's 500 Index was down 6.66 points, or 0.38 percent, at 1,763.83. The Nasdaq Composite Index was down 36.84 points, or 0.94 percent, at 3,895.10.

U.S. stocks were also pulled lower by a 4.6 percent drop in Qualcomm Inc (QCOM.O) to $66.51, the biggest drag on both the S&P 500 and Nasdaq 100. Qualcomm after the market close on Wednesday forecast fiscal 2014 revenue that disappointed investors.

Prices for U.S. Treasuries rose on the ECB's surprise rate cut. A slowdown in consumer and business spending gave investors pause, after a report on U.S. third-quarter gross domestic product prompted an initial sell-off.

"The initial selling burst on the GDP headline couldn't be sustained because the underlying numbers had just enough weakness to make people wait for the payroll numbers tomorrow," said Jim Vogel, interest rates strategist with FTN Financial in Memphis.

U.S. Bond prices rose. The benchmark 10-year U.S. Treasury note was up 8/32 in price to yield 2.6109 percent.

U.S. GDP expanded at a 2.8 percent annual rate, the quickest since the third quarter of 2012, the Commerce Department said. It was a pick-up from a 2.5 percent clip in the second quarter and beat economists' expectations for 2.0 percent growth.

The ECB's decision to cut rates to a record low of 0.25 percent followed months of grumbling by governments and bankers over the impact of a strong euro on the region's fragile recovery and weak inflation rate.

The euro slid more than 1 percent after the decision, hitting a seven-week low of $1.3356 and down from around $1.3490 just before the ECB announcement. It last traded at 1.3405 to the dollar.

The dollar index rose 0.54 percent to 80.919.

(Reporting by Herbert Lash in New York; Additional reporting by Richard Hubbard in London; Editing by Leslie Adler and Nick Zieminski)

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