GLOBAL MARKETS-Yields rise on factory data, possible stimulus hits yen
* Yen tumbles as BOJ considers more easing -sources
* U.S. stocks steady on robust economic data
* Euro, shares dip after mixed European data
* Sterling at trade-weighted five-year high
NEW YORK, Dec 2 (Reuters) - U.S. stocks rebounded slightly from a weak start on Monday after robust factory data that pointed to steady economic growth, while the yen tumbled on news that the Bank of Japan is considering expanding its stimulus. The Institute for Supply Management said the U.S. manufacturing sector expanded last month at its fastest pace since April 2011, outstripping forecasts, and data showed construction spending also exceeded expectations. That boosted the price of oil and caused selling in the U.S. bond market. U.S. Treasuries prices fell and yields rose in what will be a data-heavy week that will culminate in Friday's November U.S. jobs report. More strong data will boost expectations for the Federal Reserve to reduce its bond-buying stimulus. Around 1 p.m., the benchmark 10-year U.S. Treasury note was down 17/32, its yield at 2.8006 percent. The mood on Wall Street was cautious after less-than-encouraging holiday season sales. The S&P 500 rose slightly after eight straight weeks of gains, while the Dow and tech-heavy Nasdaq were flat. "We're not expecting a severe pullback, but we're not jumping into the market with both feet, given how far we've come, and that there are no real catalysts," said John Norris, managing director of wealth management with Oakworth Capital Bank in Birmingham, Alabama. The yen hit a more-than-six-month low versus the dollar and weakened toward a five-year trough against the euro after sources told Reuters that the Bank of Japan was looking to go beyond its $70 billion-a-month bond-buying operation. The dollar rose as high as 103.03 yen, the strongest since May 23, according to Reuters data, and was last up 0.6 percent at 102.98 yen. In Japan, the central bank's options include major purchases of stock market-linked funds or other assets riskier than Japanese government bonds, according to officials briefed on the process. "There's no sense that further stimulus is imminent," said one of the officials, adding that the Bank of Japan's inflation target is still a long way off. "There's no harm in thinking about options." Markets are figuring on further stimulus from the BOJ sometime next year on concerns that the economy and inflation will lose some momentum. Brent crude oil hit a 2-1/2 month high above $111 a barrel, while U.S. crude added 91 cents to $93.63. Gold fell nearly 2 percent to below $1,230 an ounce, undermined by concerns that a stronger U.S. economy will lead the Fed to reduce its stimulus. Gold has lost around a quarter of its value so far this year, on course for its first annual loss in 13 years. The Dow Jones industrial average was up 3.60 points, or 0.02 percent, at 16,090.01. The Standard & Poor's 500 Index was up 4.13 points, or 0.23 percent, at 1,809.94. The Nasdaq Composite Index was up 1.95 points, or 0.05 percent, at 4,061.84. The euro rose 0.3 percent to 139.49 yen. Against the dollar, the euro shed 0.3 percent to $1.3543 , retreating from Friday's one-month high of $1.3621. Sterling hit a five-year high on signs the British economy was outpacing its European neighbors. "It's all defense into Friday's number," said Tom Tucci, head of Treasuries trading at CIBC in New York. The U.S. economic outlook brightened after a gauge for factory activity hit a 2-1/2-year high in November and construction spending increased solidly in October. The Institute for Supply Management said its index of national factory activity rose to 57.3 last month -- the highest reading since April 2011. The index was at 56.4 in October. November was the sixth consecutive month of faster growth in the goods-producing sector since a contraction in May. A separate report from the Commerce Department showed construction spending increased 0.8 percent to the highest level since May 2009. Economists polled by Reuters had expected an increase of 0.4 percent. Financial data firm Markit, meanwhile, said its manufacturing index hit 10-month highs in November.
Even so, heavy discounting took a toll on U.S. retail sales during the Thanksgiving weekend as shoppers spent almost 3 percent less than they did a year earlier, according to an industry group. Sterling surged to a five-year high after data showed UK manufacturing grew at its strongest rate in almost three years, adding to recent talk that the Bank of England may not be able to hold off from raising interest rates next year. At the same, euro zone stocks were sent stumbling by disappointing equivalent figures from France and Spain that underscored the ongoing split in fortunes between them and euro zone powerhouse Germany. Britain's FTSE 100 was down 0.6 percent. Milan's main index fell 1 percent and Madrid dropped 0.8 percent, contributing to a 0.3 percent drop in the FTSEurofirst 300 index. MSCI's gauge of world stock markets slipped 0,2 percent. Bonds from core euro zone countries Germany and the Netherlands, as well as France, Italy and Spain all lost ground, as did the euro, which hit an 11-month low vs the pound.