* Weak global manufacturing data sinks stocks
* U.S. in recession for past year, according to NBER
* Oil settles below $50 a barrel to 3-1/2 year low
* U.S. 10-year Treasury yield at 50-year low
By Daniel Bases
NEW YORK, Dec 1 (Reuters) - A new round of grim economic
news, capped by a declaration that the United States slipped
into recession a year ago, pummeled stocks on Monday, driving
the S&P 500 down almost 9 percent, and sending yields on
benchmark U.S. treasuries to at least 50-year lows.
Crude oil prices fell to a 3-1/2 year low, sliding 9.5
percent to under $50 a barrel as OPEC deferred a decision to
cut supply, driving down energy shares on both sides of the
Atlantic.
Federal Reserve Chairman Ben Bernanke warned on Monday the
U.S. economy remained under considerable strain and said more
interest rate cuts were "certainly feasible," but said the Fed
could buy securities directly and backstop markets.
"The main headline is his saying that policy options could
include buying long-term Treasuries," said Dustin Reid,
currency strategist at RBS Global Banking & Markets.
"Typically we've seen safe-haven flows into Treasuries also
lifting the dollar, so it's possible the dollar will get a bit
of a bid out of this, but currency trading is going to be
choppy," Reid added.
The National Bureau of Economic Research, regarded as the
arbiter of U.S. recessions, made official the U.S. economy
slipped into recession in December 2007, ending a 73-month
economic expansion.
Manufacturing data from China, Europe and America
illustrated the impact of economic decline, with a U.S.
manufacturing index falling to a 26-year low in November.
"Things are looking quite bleak. Everyone acknowledges
that," said Brian Gendreau, investment strategist at ING
Investment Management in New York. "The question is to what
extent is that already priced into the markets. Apparently, not
entirely."
The U.S. dollar rallied on a combination of safe-haven
flows and hopes that a substantial economic stimulus package
will bolster economic activity. The Japanese currency gained
ground as investors reversed risky trades funded by cheap yen.
U.S. stocks slid on signs of the deepening global economic
slump, puncturing last week's market enthusiasm, with financial
services companies and retailers among Wall Street's biggest
casualties.
Major industrial companies also contributed to losses on
signs global demand is faltering.
At the close of New York trade, the Dow Jones industrial
average <> fell 681.07 points, or 7.71 percent, to
8,147.97. The Standard & Poor's 500 Index <.SPX> lost 80.05
points, or 8.93 percent, to 816.19. The Nasdaq Composite Index
<> dropped 137.50 points, or 8.95 percent, to 1,398.07.
RETAIL WOE
With the holiday shopping season under way, investors fear
that retailers may turn in their bleakest sales in perhaps two
decades. The S&P retail index <.RLX> declined 9.30 percent, as
shares of department store operator Macy's Inc <M.N> tumbled
13.6 percent to $6.41.
Shares of Wal-Mart Stores <WMT.N>, the world's biggest
retailer and a Dow component, shed 5.1 percent to $53.01.
Among financials, shares of Citigroup <C.N> sank 22.2
percent to $6.45 after an influential analyst forecast more
losses for the major U.S. bank.
A slide in commodity prices pushed resource stocks into the
red, with aluminum producer Alcoa <AA.N>, a Dow component,
tumbling 13.5 percent to $9.31.
Factory activity in the United States fell to a reading of
36.2 in November from 38.9 in October, the weakest level since
1982, the Institute for Supply Management said. Readings below
50 indicate contraction in activity.
In Europe, The FTSEurofirst 300 index of leading European
shares closed down 6.04 percent to 810.04 <> following a
gain of more than 13 percent last week, with banks and mining
companies leading the way down.
Banks were the worst hit, with Standard Chartered Bank
<STAN.L> falling 13.93 percent and UBS <UBSN.VX> down 12.34
percent, Fortis <FOR.BR> slipping 11.19 percent and BNP Paribas
<BNPP.PA> declining 7.63 percent.
Miners tracked weaker metals prices. BHP Billiton <BLT.L>,
Anglo American <AAL.L>, Vedanta Resources <VED.L>, Lonmin
<LMI.L>, Kazakhmys <KAZ.L>, Xstrata <XTA.L>, Antofagasta
<ANTO.L> and Rio Tinto <RIO.L> fell between 7 and 18 percent.
The Markit Eurozone Purchasing Managers Index for the
manufacturing sector slumped to 35.6 in November, the lowest
ever in the survey's 11-year history.
The grim reading reinforced expectations the European
Central Bank would cut interest rates later this week to 2.5
percent or even lower.
Interest rate futures are fully pricing in the chance that
the ECB would lower the cost of borrowing by 75 basis points on
Thursday to 2.50 percent as inflationary pressures ease.
In currencies, the euro <EUR=> was down 0.61 percent at
$1.2617 from a previous session close of $1.2695. Against the
Japanese yen, the dollar <JPY=> was down 2.40 percent at 93.18
from a previous session close of 95.470.
The yuan closed at a five-month low of 6.8848 to the U.S.
dollar <CNY=CFXS>, down 0.73 percent from Friday's close of
6.8349, marking the biggest loss since its peg to the greenback
was abolished in July 2005.
There is speculation China might adjust foreign exchange
policy, allowing more yuan weakness to stimulate the economy.
U.S. Treasury Secretary Henry Paulson said he will push China
for further currency reform when he visits Beijing this week.
The benchmark 10-year U.S. Treasury note <US10YT=RR> was up
48/32, with the yield at 2.7515 percent.
U.S. light sweet crude oil <CLc1> settled down $5.15, or
9.46 percent, to $49.28 per barrel.
Spot gold prices <XAU=> fell $47.45, or 5.82 percent,
to$768.05.
Tokyo's Nikkei 225 <> fell 115.05 points or 1.35
percent to 8,397.22.
The MSCI world equity index <.MIWD00000PUS> fell 6.53
percent to 205.68, after rising 12.37 percent last week.
(Additional reporting by Natsuko Waki, Veronica Brown,
Jonathan Cable in London; Chris Reese, John Parry, Gertrude
Chavez-Dreyfuss, and Ellis Mnyandu in New York; Editing by
Leslie Adler)
