* Stocks plunge as European bank actions stir new fears
* Yen soars worldwide, dollar at 2-1/2-year trough vs yen
* Bonds gain on safety bid as global equity markets plunge
* Oil falls below $90 a barrel on slowing demand outlook
(Recasts, adds close of European markets)
By Herbert Lash
NEW YORK, Oct 6 (Reuters) - Fear gripped investors around
the world on Monday, causing them to dump stocks and snap up
safe-havens after European leaders were seen doing too little
too late to stem a spreading financial crisis that threatens
global growth.
European shares posted their worst day on record and the
Dow slipped below 10,000 points for the first time since
October 2004 as markets reeled on credit jitters and fears of
the fallout from a potential global recession, following the
emergency rescue of two big European banks and a move by
several European governments to guarantee bank deposits.
Stocks slumped throughout Asia and Latin America, with
trading halted on both the Brazilian and Russian markets
because of steep plunges in stock prices.
"People have decided that markets have no ability to repair
themselves and politicians have control of this process," said
John Haynes, strategist at Rensburg Sheppard Investment
Management in London. "The buyers have stepped away, and the
sellers are still there."
Contagion from the credit crisis spread in Europe, gumming
up interbank money markets as banks remained reluctant to lend
to each other and investors fled to the safety of bonds.
Euro zone government debt prices shot to 6-1/2 month highs
and U.S. Treasuries surged amid mounting worries about the
impact of the world's deepest financial crisis in 80 years.
Fears of a global slowdown hammered prices for industrial
metals, with benchmark copper tumbling almost 8 percent, and
aluminum and zinc prices falling by almost 5 percent.
Crude oil prices fell below $90 a barrel to an eight-month
low on fears of a global slowdown, before paring losses. Gold
futures jumped more than 5 percent and the yen soared across
the board amid heavy selling of riskier positions.
Before 1 p.m., the Dow Jones industrial average <> was
down 557.61 points, or 5.40 percent, at 9,767.77. The Standard
& Poor's 500 Index <.SPX> was down 66.37 points, or 6.04
percent, at 1,032.86. The Nasdaq Composite Index <> was
down 122.65 points, or 6.30 percent, at 1,824.74.
"What we're seeing here is a complete global crisis. We're
seeing a complete deleveraging and that is what's taking us
down further," said Anthony Conroy, head trader for BNY
ConvergEx, an affiliate of the Bank of New York, in New York.
Shares of energy companies were a top drag as crude oil
prices slid, with the S&P energy <.GSPE> index down more than 7
percent. Shares of Exxon Mobil Corp <XOM.N> fell 2 percent to
$76.36, while shares of Chevron Corp <CVX.N> tumbled more than
5 percent to $75.43.
Shares of economic bellwethers, including General Electric
<GE.N> were also pummeled. Shares of GE, a diversified
manufacturer whose businesses include a large finance arm,
dropped 3.6 percent to $20.81.
In Europe, the pan-European FTSEurofirst 300 index <>
fell 7.75 percent to close at 1,004.90 points, its biggest
percentage fall ever and eclipsing the 6.3 percent fall
suffered on Sept. 11, 2001, during the U.S. terrorist attacks.
Banks and commodity shares took most points off the index,
with Royal Bank of Scotland <RBS.L> -- which suffered a credit
rating cut from Standard & Poor's -- sliding 20 percent,
Barclays <BARC.L> losing 14.7 percent and UBS <UBSN.VX> falling
12.8 percent.
"This is a stampede," said Valerie Plagnol, chief
strategist at CM-CIC Securities in Paris.
"It's just in free-fall. The outlook is still very bearish
and we are nowhere near the bottom. There is no reason to buy
anything at the moment," said Nicole Elliott, a technical
analyst with Mizuho Securities in London.
After Ireland offered bank deposit guarantees, four more
European governments followed suit, as the region's governments
struggled to shield banks and bank depositors and to calm
growing fears.
German lender Hypo Real Estate <HRXG.DE> became the latest
in a string of banks in Europe that had to be rescued, spooking
equity investors and sending the euro skidding to a 13-month
low against the dollar.
The troubled Belgian-Dutch financial group Fortis <FOR.BR>
was rescued in a deal with France's BNP Paribas <BNPP.PA>.
Although the cost of borrowing overnight funds on
international money markets remained close to central banks'
targets, thanks to continued liquidity injections, lending was
almost nonexistent across all other maturities.
The benchmark 10-year U.S. Treasury note <US10YT=RR> rose
40/32 to yield 3.45 percent, and the 2-year U.S. Treasury note
<US2YT=RR> rose 12/32 to yield 1.39 percent.
"It's a storm of risk aversion, with stocks down hugely and
Treasuries being the one safe market that people continue to
pour their cash into," said William O'Donnell, head of U.S.
interest rate strategy at UBS Securities LLC in Stamford,
Connecticut.
The U.S. dollar jumped to a 13-month high against the euro
and the yen rallied broadly. Sentiment soured sharply against
the euro after leaders of Europe's four biggest economies
decided against a coordinated plan at a weekend summit.
"There's a massive demand for U.S. dollars because
everybody just wants to be in U.S. dollars," said Steven
Butler, director of FX trading at Scotia Capital in Toronto.
The dollar rose against a basket of major currencies, with
the U.S. Dollar Index <.DXY> rose 0.65 percent at 81.439.
The euro <EUR=> fell 1.87 percent at $1.3511, and against
the yen, the dollar <JPY=> fell 4.31 percent at 100.76.
U.S. light sweet crude oil <CLc1> fell $4.68 to $89.20 a
barrel.
Spot gold prices <XAU=> rose $23.60 to $858.40 an ounce.
Asian stocks dropped overnight by about 5 percent and the
yen surged to a two-year high against the euro as investors
doubted the U.S. and European response to the financial crisis
could prevent a deeper slump in the global economy.
Japan's Nikkei share average <> slumped 4.25 percent
to mark its lowest close since February 2004. MSCI's index of
Asia-Pacific stocks outside Japan <.MIAPJ0000PUS> slid 6.6
percent to the lowest since December 2005.
(Reporting by Ellis Mnyandu, Chris Reese, Wanfeng Zhou and
Frank Tang in New York and Jamie McGeever, Jan Harvey, Emelia
Sithole-Matarise, Jane Merriman, Joe Brock and George Matlock
in London; Writing by Herbert Lash; Editing by Leslie Adler)
