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GLOBAL MARKETS-World stocks slide; yen buoyant

Published 08/24/2010, 07:09 AM
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* European, Asian stocks fall on anaemic global recovery

* Euro hits six-week low vs dlr, nine-year trough vs yen

* German 10-, 30-year government bond yields at record lows

By Emelia Sithole-Matarise

LONDON, Aug 24 (Reuters) - World stocks fell on Tuesday as investors fretting about an anaemic global recovery dumped risky assets and fled into government debt and other safe-haven assets including the yen, which hit a 15-year high against the dollar.

Recent data, particularly from the United States, has suggested the global upturn is faltering despite the extension of accommodative policy measures in many countries.

Comments from a Bank of England policymaker that the UK risked sliding back into recession added to broader risk aversion, driving 10-year British government bond yields near record lows and 30-year German Bund yields to all-time troughs as investors sought refuge in government debt. Bond yields move inversely to prices.

Major European shares shed more than 1 percent, and S&P 500 futures were down 0.7 percent by 1016 GMT, pointing to a lower start on Wall Street.

"The market is looking for any sign of weakness... There's so much bearishness around the U.S. economy at the moment and that's casting a pall over equity markets and helping government bonds," said Nick Stamenkovic, strategist at RIA Capital Markets

Japan's Nikkei average fell 1.3 percent, dipping below the closely watched 9,000 mark for the first time in 15 months, pressured by selling from hedge funds and foreigners.

The MSCI world equity index fell 0.7 percent to retest one-month lows. The Thomson Reuters global stock index was 0.6 percent lower.

The Nikkei index has shed nearly 15 percent so far this year, compared to a 2.6 percent fall in the MSCI Asia ex-Japan index. The 9,000-9,100 range had been strong support for the benchmark Nikkei since last year.

BUOYANT YEN

The retreat in equities buoyed the yen to a fresh 15-year high against the dollar and a nine-year peak against the euro after Japanese Finance Minister Yoshihiko Noda again resisted market pressure to comment on currency intervention.

Noda said recent currency moves were clearly one-sided and that disorderly moves could be harmful to the stability of the economy and the financial system.

The dollar fell as low as 84.34 yen on trading platform EBS, a fall of around 0.7 percent on the day, while the euro dropped more than one percent to around 106.35 yen.

The dollar was last traded 0.8 percent down versus the yen at 84.39 and the euro 1.14 percent weaker at 106.43.

"Unless the Japanese step in with something more definitive, we will see speculative accounts drive the dollar/yen down to 80 yen," said Paul Robson, RBS Global Banking currency strategist.

"The 85 yen level was pretty important and now with that gone, dollar/yen falling to 80 is a real possibility. That will hurt the Japanese economy pretty hard, unless they do something more on the fiscal side or resort to more quantitative easing."

Against the dollar, the euro fell to a six-week low of $1.2614 on EBS.

The scramble for less risky assets sent the 10-year and 30-year German Bund yields down more than 4 bps on the day to record lows at 2.214 percent and 2.871 percent respectively.

Benchmark 10-year U.S. Treasury yields were down five bps on the day at 2.546 percent, hovering near 17-month lows close to 2.53 percent struck last Friday.

Gold prices slipped to their lowest in almost a week as falling equities prompted investors to sell bullion to cover losses, while a firmer dollar also put pressure on gold.

Spot gold was bid at $1,217 an ounce by 1042 GMT, against $1,223.40 late in New York on Monday.

Crude oil lost almost a dollar to $72.18 a barrel, a seven-week low, as doubts about the ability of top oil consumer the United States to work through record stocks weighed on sentiment.

(Additional reporting by William James and Anirban Nag; editing by John Stonestreet)

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