* MSCI world equity index ends little changed
* Short dated yields fall, US dollar slumps
* Investors wait in U.S. automaker bailout
NEW YORK, Dec 11 (Reuters) - World stocks were little
changed on Thursday as investors continued to wait for
governments to finalize economic stimulus packages including a
bailout for the U.S. automakers.
In the meantime, banks and corporations scrambling to put
ultra-safe securities on their books as the year-end
approaches, drove U.S. bill yields down to near zero,
undermining support for the U.S. dollar.
Central banks are also seen continuing to lower official
interest rates, with the Swiss and South Korean central banks
cutting rates on Thursday, and the Federal Reserve expected to
do so again next Thursday.
The MSCI world stock index ended off 0.42 percent at
221.83.
U.S. stocks fell on Thursday as investors fretted about the
fate of the bailout for ailing automakers proposed by
Congress.
The fate of the $14 billion package of loans for
automakers, including General Motors Corp <GM.N> and Ford Motor
Co <F.N>, hung in the balance in the U.S. Senate, a day after
it passed the U.S. House of Representatives.[]
Shares of General Motors <GM.N> slid 10.4 percent to $4.12,
while Ford <F.N> lost nearly 9.0 percent at $2.96. Investors
fear that without government help, a potential failure or
bankruptcy of one of Detroit's carmakers could send U.S.
unemployment even higher.
The U.S. economic picture also remained bleak after the
Labor Department said the number of people filing for new
unemployment benefits surged to a 26-year high last week as
employers shed workers in anticipation of a tough recession.
The Dow Jones industrial average <> ended down 196.01
points, or 2.24 percent, at 8,565.41. The Standard & Poor's 500
Index <.SPX> fell 25.40 points, or 2.82 percent, to 873.84. The
Nasdaq Composite Index <> lost 57.60 points, or 3.68
percent, to 1,507.88.
"We keep thinking the financial crisis is over and one by
one we find a new industry that is in dire straights," said
Carl Birkelbach, head of Birkelbach Management in Chicago."
"It appears to me that the credit crunch is going to
continue and the ramifications will be negative."
On the upside, Chevron <CVX.N> gave the Dow its biggest
boost, rising 1.1 percent to $79.37, followed closely by Exxon
Mobil <XOM.N>, which added 0.8 percent to $80.69. A report from
the International Energy Agency, based in Paris, forecast
global oil demand will rebound next year, sending January crude
oil futures up $4.46 to settle at $47.98 a
barrel.[]
European shares ended lower on Thursday, snapping a
three-day winning streak, as banking stocks, weakened by
mounting concerns about a deep recession, outweighed positive
energy stocks that tracked stronger crude prices.
The FTSEurofirst 300 <> index of top European shares
closed 0.7 percent lower at 853.81 points. It has lost more
than 43 percent this year, battered by the credit crisis, which
has helped push several major economies into recession.
"There is still too much uncertainty. It's too early to
say, but we may be finding a bottom here. If we get some
stability, that would be nice," said Edmund Shing, strategist
at BNP Paribas, in Paris.
The outlook for Britain's economy darkened with news of a
sharp contraction in manufacturing and construction orders,
plunging price expectations and dire warnings from retailers
pointing to a long and painful recession ahead.[]
SHORT TERM YIELDS FALL FURTHER
In world money markets, the rates banks charge each other
for dollar, euro and sterling funds fell again on Thursday,
with the three-month dollar rate below 2.0 percent for the
first time since late 2004.
Central banks pumping cash into the system, massive
interest rate cuts, and government rescue packages have eased
tensions in the interbank market, which had been hit hard by
bank failures such as the collapse of Lehman Brothers in
September.
The Swiss National Bank cut interest rates by 50 basis
points on Thursday, its fourth easing within two months,
buoying the short-end of the market.
"The economy is seriously weak but that is priced in; it's
the Busy legacy and it's over on January 20," said Josh Stiles,
senior bond strategist at IDEAgloba.
In bond markets, U.S. Treasury debt rallied on Thursday,
pushing yields back down toward five-decade lows after the
report of a spike in jobless claims.
Ten-year notes <US10YT=RR> were trading at session highs in
the afternoon, up 23/32 for a yield of 2.62 percent, down from
Wednesday's 2.70 percent.
Strong demand for an auction of $16 billion reopened
10-year notes added yet further impetus to Treasuries.
In Europe, two-year bond yields <EU2YT=RR> were 6.3 basis
points lower at 2.141 percent, with 10-year yields <EU10YT=RR>
a basis point higher at 3.213 percent.
U.S. DOLLAR SLUMPS TO SIX WEEK LOW
The U.S. dollar fell broadly on Thursday, undermined by the
market's improved appetite for taking risk in other currencies
again as short term U.S. yields fell closer to zero.
The U.S. currency slid to a seven-week low versus the yen
and a six-week trough against the euro on Thursday.
"All the risk-related reasons to buy the dollar -- demand
for dollar money market liquidity; exiting of emerging markets;
and U.S. repatriation flows -- have all eased, and will remain
relatively subdued," said Alan Ruskin, chief international
strategist, at RBS Global Banking and Markets in Greenwich,
Connecticut.
The U.S. currency has benefited in recent months from a
global deleveraging process that saw investors scrambling to
buy the greenback to repay dollar-denominated loans.
In afternoon trading, the euro rose to $1.3405 <EUR=>, the
highest since October 20, according to Reuters data. The dollar
fell as low as 91.18 yen <JPY=>, a seven-week low, closing in
on a 13-year low around 90.90 yen.
The InterContinental Exchange's dollar index was down 2.2
percent at 83.5910 <.DXY>, its lowest since late October.
The weaker U.S. helped to push gold prices up to its
highest level in nearly two months. Spot gold <XAU=> hit a high
of $833.80 an ounce.
The other main external driver of gold, the oil price, was
also supportive, with crude oil futures in New York ending more
than 10 percent higher around $47.98 a barrel <CLc1>, after
reports that top exporter Saudi Arabia was preparing to slash
January supplies ahead of next week's meeting of oil cartel
OPEC.
(Reporting by Leah Schnurr, Pedro Dacosta, Gertrude
Chavez-Dreyfuss in New York, Atul Prakash, Ian Chua, George
Matlock and Jan Harvey in London; editing by Clive McKeef)
