GLOBAL MARKETS-Wall Street stocks pare gains as legislators support Syria action
* U.S. stocks pare gains; Microsoft slumps after Nokia deal
* Treasury bond selling resumes
* US manufacturing sector expands
* U.S. dollar hits six-week high
NEW YORK, Sept 3 (Reuters) - World equity markets were higher on Tuesday but pared gains after U.S. Congressional leaders voiced support for military intervention in Syria, while bond yields rose and the dollar gained on strong U.S. data. Wall Street stocks initially rallied on opening after U.S. President Barack Obama said over the weekend that he would seek Congressional approval for a Syria strike, delaying the threat to Middle East stability and oil supplies, but comments from Republican House Speaker John Boehner expressing support for action caused equities to pare gains. The U.S. Congress returns from its summer recess on Sept. 9, and will vote on authorizing a strike on Syria. While Obama has been pushing Congress to back his plan, passage is by no means certain. "Syria is the key thing facing markets, and stocks don't know what to expect when there's geopolitical uncertainty, especially with respect to the Middle East," said Mark Martiak, senior wealth strategist at Premier Wealth/First Allied Securities in New York. "All you know is that you can expect volatility, and that's why we're seeing stocks come off their highs." On Wall Street, where markets were closed Monday for the Labor Day holiday, the Dow Jones industrial average was up 15.16 points, or 0.10 percent, at 14,825.47. The Standard & Poor's 500 Index was up 6.70 points, or 0.41 percent, at 1,639.67. Shares of Microsoft fell 4.5 percent to $31.91 after it announced a $7.2 billion bid for the phone business of once-dominant Finnish manufacturer Nokia. U.S. shares of Nokia shot up 38.7 percent to $5.41. MSCI's world equity index, which tracks shares in 45 countries, was up 0.3 percent, while European stocks ended down 0.4 percent.
US TREASURY SELLOFF RESUMES The better U.S. data, combined with good data on the manufacturing sector from the eurozone and China published on Monday, caused selling in the U.S. bond market to resume, with the 10-year benchmark Treasury note yield rising to 2.89 percent. The data bolsters expectations the Federal Reserve will begin to reduce bond purchases when it meets on Sept. 18. After Monday's upbeat round of global data, China's non-manufacturing purchasing managers' index dropped slightly to 53.9 last month from July's 54.1. But it remained solidly in expansion territory and suggested recent government measures are supporting the economy. U.S. Treasuries prices added to losses after the U.S. manufacturing sector data. The move sent benchmark yields to near the two-year highs set about 1-1/2 weeks ago. Benchmark 10-year Treasuries last traded 30/32 lower in price for a yield of 2.900 percent, up 11.3 basis points from late on Friday. The 10-year yield reached as high as 2.902 percent earlier, roughly 3 basis points below a 25-month high recorded on Aug. 22, according to Reuters data. What the Fed will do with its $85 billion-a-month stimulus program this month remains a big focus. Traders expect the Fed to start reducing its stimulus at its Sept. 17-18 policy meeting unless U.S. payroll numbers due on Friday fall considerably short of forecasts. The U.S. dollar jumped to a six-week high against major currencies after U.S. manufacturing activity growth hit its fastest pace in more than two years. While tapering expectations support the dollar, a near-term withdrawal of Federal Reserve stimulus would weigh on stocks, particularly those in emerging markets that have come under pressure in recent months on expectations of capital outflows. The dollar index hit a high of 82.505, its highest since July 22. It last traded at 82.458, up 0.5 percent on the day. Australia's dollar bounced more than half a cent as its central bank kept interest rates at a record low 2.5 percent, as expected, on Tuesday.
OIL GAINS Global oil prices rose after an Israeli missile test in the Mediterranean jangled trader nerves, against a background of improving economic data in the United States and China and concerns over crude oil supply. Brent crude rose 48 cents to $114.81 a barrel, after reaching an earlier high of $115.74. U.S. oil added 10 cents to $107.74 from Friday's settlement. There was no Monday settlement for the U.S. benchmark due to the U.S. Labor Day holiday.