Oil prices dive more than 3%

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NEW YORK. January 5. KAZINFORM Crude oil prices tumbled more than 3 percent on Tuesday and Wall Street indexes slid as energy shares declined, as a strengthening in the dollar following surprisingly strong US factory orders spurred profit-taking after oil's recent rally. Kazinform refers to Arab News.

European shares managed to close at a one-week high, boosted by gains in oil major shares before the price of crude oil began to slide. Strong manufacturing data from around the world had boosted commodity prices earlier in the trading day.

Crude oil prices fell $3.10, or 3.39 percent, to $88.45 per barrel, a day after hitting a 27-month high.

"We had an end of year run-up and now we are getting the beginning of the year sell-off," said Stephen Schork, president at the Schork Group in Villanova, Pennsylvania.

The profit-taking overwhelmed more upbeat economic data. An unexpected increase in US factory orders in November reported on Tuesday underpinned recent evidence that the economic recovery was on a sustainable path. Orders excluding transportation recorded their largest gain in eight months.

Strength in the US dollar added to the commodity sell-off, as its rising value makes it more expensive to purchase raw materials. And commodity-related currencies, like the Canadian and Australian dollars, fell with the decline in the price of oil.

On Wall Street, weak consumer stocks and a prediction by Morgan Stanley that the benchmark S&P 500 will lose ground in 2011 weighed on sentiment a day after the S&P 500 and the Dow hit two-year highs.

Worries that rising costs of commodities such as soy beans and corn will sap supermarket profits hurt consumer stocks and dented growing optimism about the economic outlook.

In midday trade the major indexes were all lower. The Dow Jones Industrial Average fell 30.28 points, or 0.26 percent, at 11,640.47. The Standard & Poor's 500 Index lost 8.53 points, or 0.67 percent, at 1,263.34. The Nasdaq Composite Index dropped 24.75 points, or 0.92 percent, at 2,666.77.

Morgan Stanley forecast a base case year-end target for the S&P 500 at 1,238, below the close for 2010. The firm's risk-reward scenario for 2011 was "skewed to the negative."

Shares of Supervalu Inc tumbled 6.7 percent after Morgan Stanley told investors to cut holdings in the stock, saying rising food costs will crimp margins.

S&P's energy share index fell 1.42 percent.

Activity across all commodity markets picked up dramatically as traders returned from holiday, with volume at mid-session already in excess of any day over the past two weeks.

Prices for gold, copper and corn fell over 2 percent.

The Reuters-Jefferies CRB index dropped 2 percent in its sharpest one-day fall since mid-November

"It's a healthy correction in copper," said Sean McGillivray, vice president at Oregon-based Great Pacific Wealth Management.

Spot gold prices tumbled below $1,400 an ounce, losing $35.70, or 2.53 percent, to $1378.10.

Copper dropped 10.15 cents or 2.28 percent to $4.35 per pound in New York trade, down from Monday's record high.

In currency markets, the euro was down 0.3 percent from late on Monday at $1.3306 after hitting three-week peaks at $1.3435.

The dollar gained 0.09 percent to 81.78 yen. Against a basket of major trading partner currencies, the greenback rose 0.43 percent.

European shares hit their highest closing level in nearly a week on Tuesday. The pan-European FTSEurofirst 300 index closed 0.86 percent higher at 1,142.02 points. Kazinform cites Arab News. See www.arabnews.com for full version.

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