(Corrects bank name to Bank of New York Mellon Corp in 10th paragraph) * Wall Street slips as high savings rate sparks concerns * U.S. dollar slides on China comments on reserve currency * Oil slips below $70 a barrel on Nigeria amnesty report * Bonds rise as weak equities enhance save-haven appeal (Updates with U.S. markets activity; changes dateline, previous LONDON)
By Herbert Lash
NEW YORK, June 26 (Reuters) - Global shares slid on Friday after a record U.S. savings rate sparked concerns it may erode consumer spending and curb recovery, while the U.S. dollar fell following China's call for a super-sovereign reserve currency.
Weakness in equity markets helped boost the allure of fixed-income assets. U.S. Treasuries and euro zone government debt prices rose, sending U.S. benchmark yields to their lowest in nearly four weeks as Bund futures hit a one-month high.
Oil slipped below $70 a barrel after Nigeria said it would halt fighting rebels during a 60-day amnesty period for militants and release a suspected rebel leader if he accepted an amnesty offer.
Data showed that while U.S. consumer spending and income both rose in May as government stimulus spread through the economy, much of the money was being socked away.
U.S. savings jumped to a record annual rate of $768.8 billion, the highest level since records began in 1959, and the saving rate climbed to a 15-year high of 6.9 percent. (See [ID:nN26322638])
"We need people to spend money in order to keep the economy humming," said Joe Kinahan, chief derivatives strategist at online brokerage thinkorswim Group in Chicago. "The consumer has been the stalwart of the economy at this point, and we still need them to be."
At 1:27 p.m., the Dow Jones industrial average <.DJI> was down 51.17 points, or 0.60 percent, at 8,421.23. The Standard & Poor's 500 Index <.SPX> was down 3.18 points, or 0.35 percent, at 917.08. The Nasdaq Composite Index <.IXIC> was up 3.96 points, or 0.22 percent, at 1,833.50.
Stocks slid even as a separate report showed consumer sentiment rose in June to the highest since February 2008 as hopes grew the recession is abating. [ID:nN26441342]
Energy shares also weighed on equity markets as oil future fell.
The rise in personal income was abnormally high because of government stimulus payments to people and social security, said Richard Hoey, chief economist at Bank of New York Mellon Corp in New York. But he said the jump is a one-month phenomenon.
"You're going to get a lot of commentary about the super-high savings rate, but the reason the rate was high was because of this abnormal burst of income at a rate that is clearly unsustainable," Hoey said.
European shares closed lower as drugmakers fell, led by
Sanofi-Aventis
The pan-European FTSEurofirst 300 <.FTEU3> index of top shares closed down 0.1 percent at 844.59 points after initially rising.
"Over the course of the day, sentiment has seemed to have dissipated," said Peter Dixon, strategist at Commerzbank. "I also think it is a bit of a reaction to the negative day in the U.S. Investors just want to sell and take profits," he said.
U.S. TREASURY DEBT GAINS
Bond investors shrugged off the personal income data and focused instead on a tame reading of price pressures in the same report, suggesting the Federal Reserve's super-easy monetary policy has yet to spur inflation. [ID:nN26322859]
Bonds also were still on a firm footing after this week's record auction of $104 billion, calming worries over the mounting U.S. debt.
The benchmark 10-year U.S. Treasury note
Next week, the euro-zone market will see roughly 16 billion euros of supply, which will be more than offset by redemption payments amounting to around 24 billion euros, traders said.
The 10-year Bund yield
DOLLAR TUMBLES, OIL DROPS
China's central bank did not mention the U.S. dollar by name but said it was a serious defect that one currency should tower over all others. [ID:nPEK261646]
The sheer size of China's holdings of U.S. debt means such remarks are likely to continue to put pressure on the dollar.
"The Chinese own a tremendous amount of U.S. Treasuries," said Fabian Eliasson, vice president of currency sales at Mizuho Corporate Bank in New York. "They are obviously worried about inflation and losing value on their investments."
The dollar was down against a basket of major currencies, with the U.S. Dollar Index <.DXY> down 0.92 percent at 79.661.
The euro
The amnesty offer in Nigeria reversed early sharp gains in
the oil market, which followed a statement by Nigerian rebels
that they had blown up a wellhead in a Royal Dutch Shell
U.S. light sweet crude oil
Spot gold prices
Asian shares rose as higher oil and metals prices boosted resource stocks. MSCI's index of Asian stocks excluding Japan <.MIAPJ0000PUS> climbed 1.9 percent but remains below eight-month highs scaled at the start of June. Japan's Nikkei average <.N225> ended up 0.8 percent at 9,877.39. (Reporting by Leah Schnurr, Rodrigo Campos, Wanfeng Zhou, Burton Frierson in New York; Nick Vinocur, Christopher Johnson, Ian Chua and Joanne Frearson in London; Writing by Herbert Lash; Editing by Jan Paschal)