* Wall Street falls as U.S. banks sell stock to raise cash
* Dollar rebounds from four-month low on safe-haven appeal
* Government debt rebounds as weak stocks spur safety bids
* Oil eases to below $58 a barrel on profit-taking, dollar
(Updates with U.S. markets activity; changes dateline,
previous LONDON)
By Herbert Lash
NEW YORK, May 11 (Reuters) - U.S. and European stocks fell
and oil slid on Monday as investors locked in profits after a
strong run-up in riskier assets and major U.S. banks announced
large stock offerings to repay government bailouts.
U.S. Treasuries and euro zone government debt rose as the
outlook for stocks weakened, while the Federal Reserve bought
$3.51 billion of longer-dated bonds and the Bank of England
bought 3.4 billion pounds ($5.16 billion) of long-dated gilts.
Oil retreated to under $58 a barrel, pressured by weaker
equity markets, a firmer dollar and profit-taking, all helping
drive crude's price from six-month highs reached last Friday.
The dollar rose, rebounding from a four-month low, as
investors booked profits from recent gains. But interbank rates
in London continued to fall as the overall outlook in the
financial sector eases.
With government stress tests on big U.S. banks out of the
way, investors sold banking shares to take gains on both sides
of the Atlantic.
U.S. Bancorp <USB.N>, Capital One <COF.N> and BB&T Corp
<BBT.N> became the latest banks to seek additional capital by
announcing stock offerings. Investors sold bank stocks to book
profits ahead of the dilutive effects of the offerings.
U.S. Bancorp lost 5.8 percent, Capital One fell 11 percent
and BB&T Corp shed 5.4 percent.
"Banks are going to need to raise capital, that's weighing
on the market. We climbed a wall of worry, bought the rumor,
and now we're selling the news," said Marc Pado, market
strategist at Cantor Fitzgerald in San Francisco.
At 1 p.m., the Dow Jones industrial average <> was down
128.64 points, or 1.50 percent, at 8,446.01. The Standard &
Poor's 500 Index <.SPX> was down 16.55 points, or 1.78 percent,
at 912.68. The Nasdaq Composite Index <> was down 4.47
points, or 0.26 percent, at 1,734.53.
JPMorgan Chase & Co <JPM.N> fell 4.8 percent, and Bank of
America Corp <BAC.N> slipped 3.8 percent after it said last
week it would sell 1.25 billion shares to help meet what the
U.S. government deemed was a $33.9 billion capital shortfall.
In Europe, Standard Chartered <STAN.L> fell 6.8 percent,
Societe Generale <SOGN.PA> slid 3 percent and Nordea Bank
<NDA.ST> lost 4.8 percent.
"What we have here is a bit of profit taking. Everything
had got slightly over excited. Technically, equity markets have
been overbought," said Jim Wood-Smith, head of research at
Williams de Broe. "I suppose we have got a bit of a reality
check kicking in."
Not all was gloomy in the battered financial sector. HSBC
<HSBA.L>, Europe's biggest bank, gained 0.1 percent after it
said first-quarter profits were "well ahead" of last year,
swelled by record results in its investment banking unit.
Nasdaq losses were limited by reassuring comments from
German business software maker SAP AG <SAPG.DE><SAP.N>, whose
chief executive said the company expects "glimmers of hope" in
the global economy in the second half of 2009.
Shares of SAP rival Oracle Corp <ORCL.O> rose 1.5 percent,
among the top boosts to the Nasdaq, while SAP gained 2.85
percent in European trading.
Since reaching a 12-year low in early March, the Dow Jones
industrial average is up about 32 percent and the S&P 500 about
39 percent.
The dollar rose and the yen posted broad gains. The U.S.
and Japanese currencies often gain when risk aversion rises as
they are perceived as safer places in times of stress.
Hopes that the worst of the economic slump is over pushed
the dollar to multimonth lows earlier in the global session.
But with the outlook still far from certain, investors were
reluctant to push riskier assets even higher, analysts said.
"The dollar has strengthened ... as European equity markets
and U.S. futures continue to trade lower," said John Rivera,
currency analyst at DailyFX.com in New York.
The dollar rose against a basket of major currencies, with
the U.S. Dollar Index <.DXY> up 0.30 percent at 82.691. Against
the yen, the dollar <JPY=> was down 1.14 percent at 97.43.
The euro <EUR=> fell 0.41 percent at $1.359.
In government debt markets, some investors took the
opportunity to snap up bargains after a sell-off in the bond
market last week that left the market oversold.
The benchmark 10-year U.S. Treasury note <US10YT=RR> rose
21/32 in price to yield 3.21 percent. The 30-year U.S. Treasury
bond <US30YT=RR> gained 29/32 in price to yield 4.22 percent.
Dollar funding costs among banks eased with the three-month
rate sliding to a fresh low as hopes the embattled financial
sector may be recovering continued to help mend the interbank
money market.
The three-month London interbank offered rate, or Libor,
for dollars <USD3MFSR=> touched a record low of 0.92 percent,
while equivalent euro and sterling rates also hit new troughs
of 1.29625 percent and 1.41188 percent, respectively.
The premium that Libor rates trade over a risk-free
benchmark, the Overnight Index Swap rate (OIS), all eased on
Monday, with the three-month dollar/OIS spread tightening to 73
basis points at one stage -- the narrowest since late July.
U.S. light sweet crude oil <CLc1> fell 76 cents to $57.87 a
barrel.
Spot gold prices <XAU=> fell $4.05 t $912.00 an ounce.
Asian shares rose to a seven-month high, with MSCI's index
of Asia-Pacific stocks outside Japan <.MIAPJ0000PUS> up 0.7
percent after posting a 52 percent gain since their 2009 low
hit in early March.
Japan's Nikkei average <> rose 0.2 percent.
(Reporting by Edward Krudy, Wanfeng Zhou, Burton Frierson in
New York and Joanne Frearson, Emelia Sithole-Matarise, Ian Chua
and Jane Merriman in London; writing by Herbert Lash; Editing
by Leslie Adler)
