* Global stocks slump as credit market strains persist * Investor uncertainty spurs safety bid in government debt * Euro nears 13-month low vs dollar after Trichet comments * Oil falls; focus shifts to slower demand, rising supply * Gold dips 4 percent, silver 12 percent , platinum 5
(Recasts with U.S. markets, adds byline; changes dateline;
previous LONDON) By Herbert Lash NEW YORK, Oct 2 (Reuters) - New signs of stress in the U.S.
economy drove down stocks on both sides of the Atlantic and
sent oil lower on Thursday even as the U.S. Congress worked
toward passing a revised bill to rescue the ailing financial
sector. U.S. and euro zone government debt rose in a renewed
safe-haven rally as a new batch of bleak economic data in the
United States rekindled fears of a U.S. recession and slower
world growth. The dollar rose to its highest level in over a year against
the euro and other currencies after European Central Bank
President Jean-Claude Trichet said inflation risks in the euro
zone have diminished, opening the door to the ECB's first rate
cut in five years. Investors dumped gold and other precious
metals as the dollar firmed. The U.S. Senate's approval late on Wednesday of a revised
$700 billion plan to bail out banks holding bad debt failed to
allay concerns over the deteriorating economic outlook. That
view pushed down crude oil more than $4 toward $94 a barrel. The Senate approval of the rescue plan initially reassured
European stock markets, but U.S. stocks fell sharply, losing
more than 3 percent at one point, as investors focused on the
rocky economic road that still lies ahead. U.S. reports on unemployment claims and factory orders were
not reassuring. The number of people filing for new jobless
benefit claims rose to a seven-year high in the latest week and
factory orders showed a steeper-than-expected drop in August. The data shows how much damage the credit crisis has cast
on the U.S. and global economies, said Alan Lancz, president of
Alan B. Lancz & Associates Inc in Toledo, Ohio. "None of this is positive for the U.S. consumer, either.
It's almost a perfect storm and it's starting to hit home,"
Lancz said. Before 1 p.m., the Dow Jones industrial average was
down 264.03 points, or 2.44 percent, at 10,567.04. The Standard
& Poor's 500 Index was down 33.10 points, or 2.85
percent, at 1,127.96. The Nasdaq Composite Index was
down 62.86 points, or 3.04 percent, at 2,006.54. General Electric slid more than 8 percent to $22.50
after the company, seeking to raise cash, said it priced a
share offering below the stock's closing price on Wednesday. IBM shares fell 5.1 percent on the New York Stock
Exchange, while on Nasdaq, shares of eBay Inc tumbled
8.2 percent after Morgan Stanley cut its price target on the
stock. Commodity-related companies' shares also weakened as
commodity prices retreated, with miner Freeport McMoRan Copper
& Gold Inc falling 8.6 percent. European stocks fell, reversing a two-session recovery,
after the U.S. economic data was released, knocking down the
price of mining and industrial stocks. ArcelorMittal sank 9.3 percent, Rio Tinto
dropped 7.9 percent and Siemens lost 4.6 percent. The FTSEurofirst 300 index of top European shares
closed 1.3 percent lower at 1,058.81 points, after being ahead
earlier in the session. The index is down 30 percent in 2008. Banks managed to eke out gains, led by an 8.1 percent gain
at UBS after the Swiss bank said it will book a small
profit for the third quarter and reduce its U.S. commercial and
residential mortgage-related holdings. "The U.S. is tipping into recession," said Marc Touati,
economist at Global Equities in Paris, who held out a bit of
hope that all was not lost. "But we're getting to the end of
the tunnel on the credit front, and if the rescue plan goes
through, it will certainly help the economy." Money market stress eased in Europe but lending rates for
overnight loans among banks remained above central bank
targets, reflecting a strong aversion to counterparty risk and
how economic strains are making lending costlier. The U.S. commercial paper market contracted dramatically
for a third straight week as business lending and borrowing
effectively shut down, Federal Reserve data showed Thursday. The overnight rate for the London interbank offered rate in
dollars fell more than a full point to 2.68125
percent, while euro overnight rates also eased. But longer maturity rates jumped, with benchmark
three-month rates -- which now cover the year-end period --
fixed higher in dollars and euros. The benchmark 10-year U.S. Treasury note rose
18/32 to yield 3.67 percent, and the 2-year U.S. Treasury
note added 8/32 to yield at 1.68 percent. The December Bund future settled up 35 ticks at
115.72, after hitting a session high at 115.78. "Treasuries right now might be akin to the VIX" said Doug
Bender, managing director with McQueen, Ball & Associates in
Bethlehem, Pennsylvania, referring to the chief barometer of
stock market volatility. "I don't think anyone would argue there is great value in
Treasuries as the ultimate safety refuge: they are more a gauge
of fear than value," Bender said. Gold fell more than 4 percent as investors sold bullion to
cover losses on other markets. Silver plunged more than 12
percent in sympathy, while platinum shed over 5 percent to its
weakest level since January 2006 after U.S. carmakers reported
a fresh drop in auto sales in September on Wednesday. Spot gold prices fell $27.75 to $841 an ounce. The dollar rose against a basket of major currencies, with
the U.S. Dollar Index up 0.76 percent at 80.32. Against
the yen, the dollar was down 0.33 percent at 105.43. The euro fell 1.19 percent at $1.3852. U.S. light sweet crude oil fell $3.84 to $94.69 a
barrel. Asian stocks fell. The MSCI index of Asia-Pacific stocks
outside Japan fell 1.2 percent, while Tokyo's
Nikkei average dropped 1.9 percent to end at its lowest
close in three years.
(Reporting by Ellis Mnyandu, John Parry, Nick Olivari in New
York; Jane Merriman, Jan Harvey, Emelia Sithole-Matarise and
Kevin Plumberg in London and Blaise Robinson in Paris;
Reporting by Herbert Lash; Editing by Leslie Adler)
(Recasts with U.S. markets, adds byline; changes dateline;
previous LONDON) By Herbert Lash NEW YORK, Oct 2 (Reuters) - New signs of stress in the U.S.
economy drove down stocks on both sides of the Atlantic and
sent oil lower on Thursday even as the U.S. Congress worked
toward passing a revised bill to rescue the ailing financial
sector. U.S. and euro zone government debt rose in a renewed
safe-haven rally as a new batch of bleak economic data in the
United States rekindled fears of a U.S. recession and slower
world growth. The dollar rose to its highest level in over a year against
the euro and other currencies after European Central Bank
President Jean-Claude Trichet said inflation risks in the euro
zone have diminished, opening the door to the ECB's first rate
cut in five years. Investors dumped gold and other precious
metals as the dollar firmed. The U.S. Senate's approval late on Wednesday of a revised
$700 billion plan to bail out banks holding bad debt failed to
allay concerns over the deteriorating economic outlook. That
view pushed down crude oil more than $4 toward $94 a barrel. The Senate approval of the rescue plan initially reassured
European stock markets, but U.S. stocks fell sharply, losing
more than 3 percent at one point, as investors focused on the
rocky economic road that still lies ahead. U.S. reports on unemployment claims and factory orders were
not reassuring. The number of people filing for new jobless
benefit claims rose to a seven-year high in the latest week and
factory orders showed a steeper-than-expected drop in August. The data shows how much damage the credit crisis has cast
on the U.S. and global economies, said Alan Lancz, president of
Alan B. Lancz & Associates Inc in Toledo, Ohio. "None of this is positive for the U.S. consumer, either.
It's almost a perfect storm and it's starting to hit home,"
Lancz said. Before 1 p.m., the Dow Jones industrial average was
down 264.03 points, or 2.44 percent, at 10,567.04. The Standard
& Poor's 500 Index was down 33.10 points, or 2.85
percent, at 1,127.96. The Nasdaq Composite Index was
down 62.86 points, or 3.04 percent, at 2,006.54. General Electric slid more than 8 percent to $22.50
after the company, seeking to raise cash, said it priced a
share offering below the stock's closing price on Wednesday. IBM shares fell 5.1 percent on the New York Stock
Exchange, while on Nasdaq, shares of eBay Inc tumbled
8.2 percent after Morgan Stanley cut its price target on the
stock. Commodity-related companies' shares also weakened as
commodity prices retreated, with miner Freeport McMoRan Copper
& Gold Inc falling 8.6 percent. European stocks fell, reversing a two-session recovery,
after the U.S. economic data was released, knocking down the
price of mining and industrial stocks. ArcelorMittal sank 9.3 percent, Rio Tinto
dropped 7.9 percent and Siemens lost 4.6 percent. The FTSEurofirst 300 index of top European shares
closed 1.3 percent lower at 1,058.81 points, after being ahead
earlier in the session. The index is down 30 percent in 2008. Banks managed to eke out gains, led by an 8.1 percent gain
at UBS after the Swiss bank said it will book a small
profit for the third quarter and reduce its U.S. commercial and
residential mortgage-related holdings. "The U.S. is tipping into recession," said Marc Touati,
economist at Global Equities in Paris, who held out a bit of
hope that all was not lost. "But we're getting to the end of
the tunnel on the credit front, and if the rescue plan goes
through, it will certainly help the economy." Money market stress eased in Europe but lending rates for
overnight loans among banks remained above central bank
targets, reflecting a strong aversion to counterparty risk and
how economic strains are making lending costlier. The U.S. commercial paper market contracted dramatically
for a third straight week as business lending and borrowing
effectively shut down, Federal Reserve data showed Thursday. The overnight rate for the London interbank offered rate in
dollars fell more than a full point to 2.68125
percent, while euro overnight rates also eased. But longer maturity rates jumped, with benchmark
three-month rates -- which now cover the year-end period --
fixed higher in dollars and euros. The benchmark 10-year U.S. Treasury note rose
18/32 to yield 3.67 percent, and the 2-year U.S. Treasury
note added 8/32 to yield at 1.68 percent. The December Bund future settled up 35 ticks at
115.72, after hitting a session high at 115.78. "Treasuries right now might be akin to the VIX" said Doug
Bender, managing director with McQueen, Ball & Associates in
Bethlehem, Pennsylvania, referring to the chief barometer of
stock market volatility. "I don't think anyone would argue there is great value in
Treasuries as the ultimate safety refuge: they are more a gauge
of fear than value," Bender said. Gold fell more than 4 percent as investors sold bullion to
cover losses on other markets. Silver plunged more than 12
percent in sympathy, while platinum shed over 5 percent to its
weakest level since January 2006 after U.S. carmakers reported
a fresh drop in auto sales in September on Wednesday. Spot gold prices fell $27.75 to $841 an ounce. The dollar rose against a basket of major currencies, with
the U.S. Dollar Index up 0.76 percent at 80.32. Against
the yen, the dollar was down 0.33 percent at 105.43. The euro fell 1.19 percent at $1.3852. U.S. light sweet crude oil fell $3.84 to $94.69 a
barrel. Asian stocks fell. The MSCI index of Asia-Pacific stocks
outside Japan fell 1.2 percent, while Tokyo's
Nikkei average dropped 1.9 percent to end at its lowest
close in three years.
(Reporting by Ellis Mnyandu, John Parry, Nick Olivari in New
York; Jane Merriman, Jan Harvey, Emelia Sithole-Matarise and
Kevin Plumberg in London and Blaise Robinson in Paris;
Reporting by Herbert Lash; Editing by Leslie Adler)