(Recasts with U.S. markets, adds byline; dateline previous
LONDON)
By Herbert Lash
NEW YORK, March 10 (Reuters) - U.S. Treasury debt prices
jumped and global stocks slipped on Monday as deteriorating
credit conditions spooked investors and sparked rumors that
Bear Stearns could be on the brink of bankruptcy.
Chairman Alan "Ace" Greenberg called speculation about Bear
Stearns "totally ridiculous," but investors remained jittery
amid a growing list of troubles slamming financial markets.
Oil hit a record high of $107 a barrel, reversing earlier
losses, as investors sought oil as a hedge against a depressed
dollar and concerns that inflation is on the rise.
U.S. Treasury debt prices extended gains, pushing yields on
the benchmark 10-year note down to about 3.45 percent, and
Euro-zone government bond futures jumped to their highest level
in 15 months on the rumors concerning Bear Stearns.
Bear Stearns <BSC.N>, tumbled almost 14 percent to $60.34
before it pared nearly half those losses after CNBC television
reported Greenberg's remarks.
Evidence of trouble popped up in many places.
Private equity and real estate company Blackstone Group LP
said challenging business conditions and a write-down of bond
insurer FGIC led to a huge fourth-quarter slump in earnings.
Citigroup forecast U.S. investment banks would suffer about
$9 billion of write-downs in the first quarter, driven by more
leveraged loan and mortgage-related losses.
All this as the head of Japan's financial regulator said
global financial losses from the crisis have totaled $215
billion, with just over half coming from the United States.
Financials were among the top drags on Wall Street, with
shares of Bank of America Corp <BAC.N>, the No 2 U.S. bank,
down 3 percent at $35.65 while Citigroup Inc <C.N>, the largest
U.S. bank by assets, slid 3.7 percent to $20.14.
The Dow Jones industrial average <> fell 56.09 points,
or 0.47 percent, to 11,837.60. The Standard & Poor's 500 Index
<.SPX> shed 9.46 points, or 0.73 percent, to 1,283.91. The
Nasdaq Composite Index <> slid 19.09 points, or 0.86
percent, to 2,193.40.
Recession concerns hit shares of big manufacturers,
including Boeing Co <BA.N>, which led the Dow's decliners with
a drop of 1.7 percent to $75.24.
European stocks shed more than 1 percent on fears
deteriorating credit conditions could put big institutions
under more serious financial stress.
The FTSEurofirst 300 <> index of top European shares
was down 1.2 percent at 1,254.76, close to the day's lows,
shortly after midday.
MSCI's main gauge of world shares <.MIWD00000PUS>, a
benchmark for many professional investors, was down 0.3 percent
for a more than 11 percent loss since the beginning of the
year.
Earlier, Japan's Nikkei finished down 250.67 points or 2
percent at 12,532.13, its lowest since Sept. 1, 2005. The
broader TOPIX <> closed down 1.9 percent at 1,224.39.
A government employment report on Friday that showed a
second straight month of job losses led Goldman Sachs to change
its view on monetary policy and say the Federal Reserve may cut
interest rates ahead of a policy-setting meeting on March 18.
The Fed will cut the benchmark federal funds rate to 2
percent by late April from a current 3 percent, most likely in
half-percentage point steps at the next two meetings, it said.
The February jobs report last week leaves little doubt that
the U.S. economy is in recession, Goldman said.
With the multitude of news discouraging investor appetite
for risk, bond prices rose as investors sought safety.
"What we're seeing is a certain flight to quality being
driven by events within credit," said Joseph DiCenso,
fixed-income strategist at Lehman Brothers.
In Europe, June Bund futures <FGBLc1> rose nearly 80 ticks
to hit a high of 112.28 -- a level last seen in late 2006 --
driving the 10-year cash yield <EU10YT=RR> to a 15-month low of
3.711 percent.
The dollar extended losses against the yen, falling to a
session low at 101.57 yen <JPY=>, according to Reuters data,
not far from last week's eight-year low around 101.40 yen.
"This is all equity-driven. People are taking risk off the
table," said John McCarthy, director of foreign exchange at ING
Capital Markets in New York. "The dollar will remain under
pressure, with the biggest losses coming against the yen and
Swiss franc."
U.S. stocks <> turned lower on talk that a Wall Street
firm may have liquidity concerns.
Oil reversed earlier losses as investors sought oil as a
hedge against a depressed dollar and inflation.
A rush by financial funds into commodities and political
tensions are the prime drivers of a rally that has lifted oil's
average to above $95 for the year.
Gold is generally seen as a hedge against oil-led
inflation.
U.S. crude <CLc1> jumped $1.85 to $107 a barrel. It had
sunk to $104.08 in earlier trading and by 1451 was up $1.50 at
$106.65. London Brent <LCOc1> crude was up 40 cents at
$102.78.
Gold recovered from session lows after a sharp decline, as
record high oil prices and a weaker dollar attracted investors
and speculators back into the market.
Analysts said gold was likely to trade in a range ahead of
a U.S. Federal Reserve meeting next week, but expectations of
further interest rate cuts in the United States were likely to
support the market over the medium to long-term.
"The upward trend is still in place. People are just
waiting for something to take it up towards $1,000 or may be
above it," said Michael Widmer, metals analyst at Lehman
Brothers.
Spot gold <XAU=> fell as low as $961.00 an ounce and was
quoted at $968.55/969.25 after midday, against $972.60/973.40
late in New York on Friday.
(Reporting by Kristina Cooke Pedro Nicolaci da Costa, Steven
C. Johnson and Atul Prakash in London)
(Writing by Herbert Lash)
