World stocks down after gangbusters 2013, oil off on Libya

By Rodrigo Campos

NEW YORK (Reuters) - World share markets kicked off 2014 with a whimper on Thursday, weighed down by disappointing Chinese manufacturing data, with oil prices also lower as Libya prepares to reopen a major oilfield.

After their best run in 15 years, U.S. markets fell in early trading, with major indexes posting their largest daily drops in three weeks.

The U.S. dollar, however, was having its biggest daily rally in five months against a basket of major currencies as jobs, housing and manufacturing data gave support to the Federal Reserve's decision to start slowing its stimulus program this month.

Global manufacturing ended 2013 on a strong note as major exporters like Japan, Germany and Italy posted their fastest growth in years, although China's performance remained modest, surveys showed.

"There was a sequential decline in the (Chinese) PMI number, so that knocked down indexes a bit. It's definitely taking a bit of a breather in looking for the new catalyst, looking for the next investment theme to unfold and develop," said Anastasia Amoroso, global market strategist with J.P. Morgan Funds, in New York.

"It's a slow start to the new year but it's also important to look past one day of data points and what we think is going to be a continuation of a cyclical expansion in the United States and elsewhere."

The Dow Jones industrial average fell 87.23 points, or 0.53 percent, at 16,489.43. The Standard & Poor's 500 Index was down 11.12 points, or 0.60 percent, at 1,837.24. The Nasdaq Composite Index was down 28.04 points, or 0.67 percent, at 4,148.56.

The pan-European FTSEurofirst 300 was down 0.8 percent after starting the day at a 5 1/2- year high. MSCI's 45-country share index was also down 0.8 percent.

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Crude prices fell after Libya prepared to restart a major oilfield and on slowing economic expansion in China, the world's No. 2 oil consumer.

Brent was last down 2 percent at $108.59 a barrel and U.S. crude was last at $96.36 per barrel, also down 2 percent.

Spot gold climbed 1.9 percent to $1,223 an ounce. The move recouped some of the losses that made last year gold's worst in three decades.

Three-month LME copper rose to its highest in seven months.

DOLLAR STRENGTHENS

The euro, the strongest-performing major currency in 2013 but historically a weaker performer at the start of a calendar year, dropped to a two-week low of $1.3634 and last traded 0.8 percent lower at $1.3648.

The U.S. dollar hit a high of 105.44 yen, its strongest level versus the Japanese currency since October 2008, before erasing gains to trade down 0.2 percent at 105 yen.

Japanese financial markets are closed on Thursday and Friday for the New Year's break.

Against a basket of currencies the greenback rose 0.7 percent.

"Today is the first day where fundamentals work out again ... That's why there is pressure on euro/dollar," said Ulrich Leuchtmann, the head of currency research at Commerzbank in Frankfurt.

Yields on U.S. 10-year paper dipped below 3 percent after hitting a high of 3.04 percent.

(Reporting by Rodrigo Campos; Additional reporting by Chuck Mikolajczak and Julie Haviv in New York and Laurence Fletcher in London; Editing by Dan Grebler)