Dollar edges up after rout vs. euro, yen

The U.S. dollar was recovering from its drop against most major rivals Friday following global-slowdown concerns that led investors to shove the greenback lower.

The ICE dollar Index DXY +0.02% , a measure of the U.S. unit against six other major currencies, rose to 80.517, up from 80.442 late Thursday in North America. The WSJ Dollar Index XX:BUXX +0.13%  , a rival measure of dollar strength, rose to 74.13 from 74.04.

Against the Japanese yen USDJPY -0.04% , the dollar was buying ¥103.40, up from ¥103.10 late Thursday. The dollar slid more than 1% to below the ¥104 level on Thursday in the wake of an unexpected contraction in China’s manufacturing sector in January, as well as a decline in an preliminary gauge of U.S. manufacturing to a three-month low this month, with some of the slowdown stemming from cold weather.

“Heightened risk aversion was responsible for the sharp distinction in currency performance on Thursday,” including a more than 1% rise for the euro against the dollar and a gain of around 1.6% for the Swiss franc, Itaú BBA fixed-income strategy Pablo Salgado said in a note Thursday.

The euro EURUSD -0.04%  gave up some ground Friday, fetching $1.3682 compared with $1.3691, while the Swiss francUSDCHF +0.04%  eased as the dollar won back some of its prior-session decline to buy 0.8998 franc versus 0.89761 franc.

The British pound GBPUSD -0.03%  , however, was little changed at $1.6635, after breaking above the $1.66 level for the first time since May 2011.

But the Australian dollar AUDUSD -0.79% couldn’t shake off its 1.1% fall on Thursday, sitting unchanged at 87.64 U.S. cents. The Australian dollar was hit following the data from China, which is Australia’s largest export market.

With “tentative signs of softening activity at the margin,” in the U.S., the jump in risk aversion has been “fueled by the growing perception that some emerging markets are particularly fragile,” wrote Itaú’s Salgado.

He also outlined country-specific issues that are rattling emerging-market currencies, including a 15% slide in Argentina’s peso USDARS +0.01%  after the central bank eased off its intervention efforts to prevent foreign reserves from declining further.

Emerging-market stocks were also hit hard Thursday, leaving the MSCI Emerging Markets Exchange-Traded Fund EEM +0.15%   at a four-month low .

Gold dips after hitting two-month highs

 Gold prices fell just fractionally on Friday, giving back a small chunk of their hefty gains from the prior session, when a drop in the equity market sent investors scurrying for the perceived safety of the precious metal.

In electronic trade, gold for February delivery GCG4 -0.21%  was down $2.90, or 0.2%, at $1,259.40 an ounce. March silver SIH4 +0.03%  turned lower, slipping 1 cent to $20 an ounce.

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Gold on Thursday spiked to its highest close in more than two months, riding not only the retreat stocks, but also a weaker dollar DXY +0.01% and the prospect of India easing curbs on imports.

The gold ETF GLD -0.11%   broke through levels not seen since Dec. 10, and moved well above its 50-day moving average.Read more from The Tell .

Separately, platinum for April deliveryPLJ4 -0.21%  on Friday shed $4.90, or 0.3%, to $1,458.30 an ounce, though the direction could change if a labor strike in South Africa lingers.

“The radical AMCU union, which represents the majority of workers in the platinum mining industry, is demanding that wages be more than doubled,” said Commerzbank’s Eugen Weinberg. “The strikes are to continue until such time as these demands are met. This could noticeably tighten the situation on the global platinum market.”

Elsewhere in metals trading, March palladium PAH4 +0.28%  added $2.05, 0.3%, to $747.95 an ounce. High-grade copper for March delivery HGH4 +0.37%  gained a penny to $3.30 a pound. 

U.S. stocks fall on China worries; Dow at 5-week low Manufacturing contracts in China; gold and Treasurys rally

U.S. stocks closed sharply lower on Thursday as weak economic data from China prompted investors to sell resource stocks and emerging-markets assets and seek safety in bonds, gold, and high-dividend paying sectors.

The S&P 500 SPX -0.89%  fell 16.40 points, or 0.9%, to 1,828.46, breaking a two-day winning streak. Losses were led by financials and materials sectors. Only telecoms, a sector whose stocks are known for their dividend yields, ended higher. The benchmark index is down 1.1% year-to-date.

The Dow Jones Industrial AverageDJIA -1.08%  fell to a five-week low, shedding 175.99 points, or 1.1%, to 16,197.35. The blue-chip index recorded its third straight session of losses.

The Nasdaq Composite COMP -0.57% lost 24.13 points, or 0.6% to 4,218.87, trimming gains it clocked in since the start of the year. Read the recap of the stock market live blog.

Indexes suffered broad-based losses amid high trading volumes. Thursday’s total composite volume was the largest this year, as more than 7.3 billion shares changed hands, according to FactSet.

Investors appeared most worried about the surprise contraction in China’s manufacturing sector, which followed concerns over the country’s financial system. On Tuesday, China’s central bank announced it is injecting more liquidity into the system ahead of the Lunar New Year holiday.

“China’s banks have been having liquidity issues since last summer, and what worries investors is contagion. If their problems are severe, large banks in the U.S. and Europe will be affected, triggering another crisis,” said Quincy Krosby, market strategist at Prudential Financial. “What is happening in the U.S. stock market is consolidation and realization that the Fed is not going to come to the rescue of the markets with liquidity anymore, as the economy is growing again.”

Gold closed at a two-month high and Treasurys rallied, sending yields lower. The concern about China, alongside expectations the Federal Reserve’s monetary tightening would lead to higher U.S. interest rates, hit emerging markets assets hard. The ETF tracking the benchmark MSCI Emerging Markets index EEM +0.15%  closed at a four-month low.

Among the day’s other economic data, an early gauge of U.S. manufacturing dipped in January from the prior month, but some of the slowdown was due to cold weather, Markit reported Thursday. The U.S. flash purchasing managers index slipped to 53.7 in January, down from December’s level of 55, which was an 11-month high. This is the slowest improvement in conditions since October.

U.S. initial jobless claims rose slightly to 326,000. “Today’s jobless claims data had a worrying component — continuing claims stayed above 3 million. Investors are concerned about the labor market and it is showing in today’s selloffs,” said Chris Gaffney, senior market strategist at EverBank.

The leading economic index rose 0.1% in December, marking its sixth gain in a row, the nonprofit Conference Board said Thursday.

In the housing sector, sales of existing homes rose 1% in December to a 4.98 million annual rate, while the median sale price climbed 9.9% to $198,000.

In earnings news, McDonald’sMCD +0.46%  reported nearly flat earnings in the fourth quarter, as sales edged down slightly while expenses rose. Earnings per share were $1.40, slightly ahead of consensus expectations. Chief Executive Don Thompson called 2013 “a challenging year.” Shares in the fast-food chain ticked up 0.5%.

Shares in Netflix Inc. NFLX -0.02% rallied 16.5% after the video streaming company reported better-than-expected earnings late on Wednesday.

Herbalife Ltd HLF -0.30%  shares slid 10% after U.S. Sen. Edward Markey, a Democrat from Massachusetts, on Thursday called for an investigation of the business practices of the company, which he called “a possible pyramid scheme.”

Santander Consumer USA Holdings SC +0.36%  climbed 5% on its debut, after the auto lender sold 74 million shares at $24, raising $1.8 billion.

In after-hours market, shares in Starbucks Corp. SBUX +1.17%  rose 0.7% after the coffee-shop chain reported quarterly earnings above analysts’ expectations.

Microsoft Corp. MSFT +3.51% shares rallied 3.7% in the after-hours market, after thecompany reported better quarterly earnings and revenue than analysts expected.

Gold moves lower for third-straight session

Gold for February deliver GCG4 -0.15% dipped $5.30, or 0.4%, to $1,233.50 an ounce. March silver SIH4 -0.37%  lost 13 cents, or 0.7%, to $19.71 an ounce.

There hasn’t been much in the way of economic data to push and pull gold prices, but that could change on Thursday, with weekly jobless claims, the Markit “flash” U.S. PMI, existing home sales and leading indicators all set to be reported. Read: Spotlight on the economy .

A day earlier, gold wilted under the pressure of some bearish bank comments, closing lower for the second-straight day after showing some life last week.

The banks are “basing this on an economic recovery, with interest rates gradually working their way higher throughout 2014, which creates a scenario where gold — a non-performing asset — doesn’t have the allure that it had in this recent cycle,” said Peter Hug of Kitco News.

“I’ve been looking at $1,255 being breached on the upside with some momentum, but it’s just not been able to do it,“ he said, adding that the gold market “feels heavy.”

Elsewhere in metals trading, platinum for April delivery PLJ4 -0.86%  sank $11.70, or 0.8%, to $1,450.70 an ounce with South African strikes at platinum mines set for a strike on Thursday.

March palladium PAH4 -0.55%  lost $3,80, or 0.5%, to $745.05 an ounce. High-grade copper for March HGH4 -0.63% gave up two cents, or 0.5%, to $3.32 a pound.