Brent crude fell below $97 per barrel yesterday to its lowest in more than two years as lackluster Chinese economic data lowered prospects for demand at a time of abundant supply, while expectations that the Federal Reserve will provide new details this week about its plans to raise interest rates lifted the dollar.

Chinese factory output grew at the weakest pace in nearly six years in August as growth in other key sectors also cooled, raising fears that the world’s second-largest economy may be at risk of a sharp slowdown.

The Brent contract for October delivery, which expired later yesterday, fell as low as $96.21 a barrel, its weakest since July 2012. The contract later pared most losses to trade around $96.98, down 13 cents.

“Maybe the pullback on the China data was a little overdone,” said Gene McGillian, an analyst at Tradition Energy in Stamford, Connecticut, echoing the sentiment of other analysts.

News that Russian Energy Minister Alexander Novak will meet Opec officials today in Vienna was cited as helping pull oil prices off lows.

The dollar rose on expectations that the policy-setting Federal Open Market Committee will affirm the US economy's steady recovery tomorrow at the end of a two-day Fed meeting, and possibly provide a time-line as to when it would start to raise rates.

US manufacturing output fell for the first time in seven months in August, but the underlying trend remained consistent with steadily rising factory activity. That was confirmed by other data showing factory activity in New York state jumped to its highest level in nearly five years in September.

The euro fell 0.12 per cent against the dollar to $1.2949, while the dollar index, a measure of the dollar’s strength against a basket of major currencies, rose 0.02 per cent to 84.259. The Japanese yen slipped 0.15 per cent against the dollar to 107.16.

Most US stocks fell, dragged lower by the tech sector as investors made space in their portfolios for Alibaba’s planned initial public offering later this week, and biotech shares weighed further on the Nasdaq. “The Alibaba IPO is going to have a big effect, drawing money out of some stocks, and how it performs can help say a lot about the tech sector,” said Rick Meckler, president of LibertyView Capital Management in Jersey City, New Jersey.

The Dow Jones industrial average rose 15.27 points, or 0.09 per cent, to 17,002.78. The S&P 500 fell 5.16 points, or 0.26 per cent, to 1,980.38 and the Nasdaq Composite lost 51.59 points, or 1.13 per cent, to 4,516.00.

MSCI's all-country world index of equity performance across 45 countries fell 0.29 per cent to 424.95. In Europe, the FTSEurofirst 300 index of top regional shares closed down 0.05 per cent at 1,382.32 points.

US Treasury debt prices rose on bargain hunting encouraged by fresh signs of spotty economic growth.

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