Euro-fizzer deflates Wall St rally

Stocks on Wall Street closed lower, ending a three-day rally, as investors expressed disappointment over proposed measures to strengthen euro-zone fiscal governance.

At the close (8am NZ time), the Dow Jones Industrial Average was down 77.o4 points, or 0.7%, to 11,405.86, led lower by Bank of America's 4% drop and Alcoa's 2.9% decline.

All but two of the Dow's 30 components declined. The Dow came off a 214-point rally on Monday. It gained 7.1% over the previous three sessions, its biggest three-day move since March 2009.

The blue-chip index, which briefly turned positive at one point, fell as much as 190 points as comments from German Chancellor Angela Merkel and French President Nicolas Sarkozy failed to alleviate investor concerns about the state of the euro zone.

The S&P 500 index lost 0.9% to 1193 with financial and energy stocks worst affected in a broad selloff. All 10 S&P 500 sectors traded in the red.

The technology-oriented Nasdaq Composite has shed 0.9% to 2520.

On the US economic front, home construction dropped slightly in July after two consecutive monthly gains.

Import prices increased last month as both fuel and non-fuel costs rose, reversing some of June's declines but leaving the overall inflation picture subdued.

Industrial production rose slightly last month, as car makers recovered from natural disasters in Japan.

Other markets: Europe falls, mixed in Asia
European stocks closed slightly lower as Fitch Ratings' affirmation of its triple-A credit rating on the US helped equities pare most losses that followed disappointing growth data from Germany and the rest of the euro zone.

The Stoxx Europe 600 index fell 0.1% to 237.56, reversing course after rising 6.4% over the previous three sessions.

German second-quarter GDP came in well below expectations, up 0.1% quarter on quarter versus expectations of a 0.5% rise. At the same time, GDP data for the whole of the euro-zone also disappointed, up by just 0.2% in the second quarter.

Germany's DAX fell 0.5% to 5994.90 and France's CAC-40 closed down 0.3% at 3230.90. The UK's FTSE 100 inched up 0.1% at 5357.63.

In Asia, Korean stocks soared after a three-day weekend and Japanese stocks edged higher after an extended rebound on Wall Street.

But caution prevailed in other Asian markets. Chinese stocks ended lower after advancing for four straight days, while those in Hong Kong, Australia and Taiwan gave up early gains.

The Shanghai Composite Index dropped 0.7% to 2608.17, Australia's S&P/ASX 200 index declined 0.8% to 4247.30 and Taiwan's Taiex slipped 0.3% to 7798.59.

Hong Kong's Hang Seng Index shed 0.2% to 20212.08.

India's Sensex, after spending most of the day in positive territory after a three-day holiday weekend, finished down 0.6% at 16730.94, the lowest close in 14 months.

Commodities: Oil falls, gold hits record
Crude-oil futures prices were lower on new concerns the Euro-zone crisis will drag on.

After touching a high of $US88.05 a barrel on Monday, futures broke below $US86 as theUS dollar gained on the euro.

Light, sweet crude oil for September delivery in New York was $US1.93 a barrel, or 2.2%, lower at $US85.95 a barrel. September ICE Brent crude oil, ahead of its expiration, was $US1.31 lower at $US108.60 a barrel.

Gold futures ended at a record high after a three-day break when firmer equities markets late last week and again on Monday damped investor demand.

The contract for August delivery rose $US26.90, or 1.5%, to settle at $US1782.40 an ounce in New York.

The most actively traded contract, for December delivery, rose $US27 to settle at $US1785.00.

Currencies: Swiss franc falls on pegging talk
Expectations that Switzerland will resort to dramatic measures, including a peg to the euro, to weaken its currency sent the franc sharply lower, a day ahead of a key decision by monetary authorities on measures to temper what has become a one-way bet.

During recent financial market turmoil the franc has reached record highs against virtually every major currency, hurting Swiss exporters and its tourism industry.

The US dollar was at 0.7925 franc, more than nine centimes above last week's record low. The euro bought 1.1422 francs, after having grazed parity with the franc for the first time on August 9. All told, the franc has fallen for the last five trading sessions.

Meanwhile, the euro was at $US1.4423 compared with $US1.4444 late on Monday. The dollar was at ¥76.75 from ¥76.84, while the euro was at ¥110.70 compared with ¥111.

The UK pound bought $US1.6421 compared with $US1.6390.