* Wall St slides on bank jitters, earnings outlook caution
* U.S. dollar rallies broadly as equities worldwide tumble
* Government debt gains as bank worries spur risk aversion
* Oil drops almost 9 pct on economic outlook, dollar rally
(Adds close of U.S. markets)
By Herbert Lash
NEW YORK, April 20 (Reuters) - Crude oil fell almost 9
percent and stocks around the world fell sharply on Monday
after a jump in troubled loans at Bank of America and renewed
economic jitters cooled hopes that the worst of the global
slowdown was over.
The U.S dollar rallied broadly to trade at one-month highs
as the slide in equity markets boosted the safe-haven demand
for the greenback, U.S. and European government debt and gold.
Concerns about the quality of earnings at banks spilled
over to other sectors and put a damper on investors' appetite
for risk.
The Chicago Board Options Exchange Volatility index <.VIX>,
which is regarded as a barometer of Wall Street fear, soared
16.1 percent in its biggest one-day percentage gain in three
months.
The rout on Wall Street clipped a six-week winning streak,
the longest for the S&P 500 since 2007 and a period in which
the Dow scored its biggest six-week gain since 1938.
Bank of America <BAC.N> shares shed 24 percent after the
biggest U.S. bank reported that its troubled loans jumped in
the first quarter, even as its quarterly earnings more than
doubled, helped by its purchase of Merrill Lynch & Co. The bank
also warned it expects the credit situation to worsen. (For
details see []).
Also hurting sentiment was a key gauge of future economic
activity, which fell for the third month in a row in March,
showing the U.S. recession may persist through the summer.
[]
In yet another sign of weakness, Germany fell deeper into
recession in the first quarter, the Bundesbank said, fueling
expectations of a record contraction in gross domestic product.
[]
European and U.S. stock indexes fell more than 3.0 percent
as analysts ratcheted back their earnings expectations.
In the U.S., the KBW bank index <.BKX> fell 15.4 percent as
analysts questioned the quality of earnings despite the
better-than-expected results that have been reported by such
major U.S. banks as Goldman Sachs, Wells Fargo, JPMorgan Chase,
Citigroup and Bank of America.
"The reality is all the banks reported lower earnings than
what they did a year ago," said Fred Dickson, market strategist
at D.A. Davidson & Co in Lake Oswego, Oregon.
The Dow Jones industrial average <> shed 289.60 points,
or 3.56 percent, at 7,841.73. The Standard & Poor's 500 Index
<.SPX> fell 37.21 points, or 4.28 percent, at 832.39. The
Nasdaq Composite Index <> lost 64.86 points, or 3.88
percent, at 1,608.21.
Shares of Citigroup Inc <C.N> fell 19.5 percent after
Goldman Sachs said credit losses at the bank continued to grow
at a rapid rate, putting a damper on earnings expectations.
Banks also sliced the most points off an index of leading
European companies, sparked by the Bank of America results.
The FTSEurofirst 300 <> index of top European shares
closed 3.5 percent lower at 786.12 points, the biggest daily
percentage drop since March 30.
Deutsche Bank <DBKGn.DE> lost 8.6 percent, Barclays
<BARC.L> fell 7.9 percent and BNP Paribas <BNPP.PA> 6.6
percent. The DJ STOXX Banks Index <.SX7P> fell 5.5 percent.
Oil slid 8.8 percent to below $46 a barrel, depressed by a
rising dollar and growing caution about the pace of any
economic recovery and its impact on demand.
"A lot of refineries are not running at full capacity. A
lot of oil is going into storage," said oil minister Mohamed
al-Hamli of the United Arab Emirates, a member of the
Organization of Petroleum Exporting Countries.
"We've seen that stocks are building up. We've seen them go
from 52 days to close to 59 days," al-Hamli told reporters at a
Dubai conference. [].
U.S. crude for May delivery <CLc1> settled down $4.45 at
$45.88 a barrel. Brent crude <LCOc1> for June settled 6.5
percent lower at $49.86, down $3.49.
The May U.S. crude contract expires on Tuesday, which
traders also cited as a factor pressuring oil prices.
President Barack Obama said on Sunday the U.S. economy
remained under strain and his top economic adviser tempered
hopes for a speedy recovery that had driven Wall Street to six
straight weeks of gains.
The head of the International Monetary Fund, Dominique
Strauss-Kahn, was quoted Sunday as saying the IMF would cut its
global economic forecasts this week and that he did not expect
a recovery to start unitl the first half of next year.
The euro fell below $1.29 for the first time in a month as
investors favored the dollar, which is seen as the best store
of value when economic growth worldwide is shrinking.
"Investors realize that we're in this for the long haul.
Bank news is uncertain enough that risk aversion resurfaces at
the slightest hint of weakness," said Brian Dolan, chief
currency strategist at Forex.com in Bedminster, New Jersey.
The dollar rose against a basket of major currencies, with
the U.S. Dollar Index <.DXY> up 0.88 percent at 86.651. Against
the yen, the dollar <JPY=> fell 1.18 percent at 97.96.
The euro <EUR=> fell 0.87 percent at $1.2924.
U.S. gold futures for June delivery <GCM9> settled up
$19.60 at $887.50 an ounce in New York.
"Concerns about the banking sector have put equities under
pressure and caused investors to look out for gold as a
traditional safe haven," said Alexander Zumpfe, precious metals
trader at Heraeus.
U.S. and euro zone government bonds rallied as the slide in
equities spurred appetite for less risky fixed-income assets.
"It's a pure risk aversion type day today ... it's all
about the bond market reacting to very weak equities," said
John Davies, fixed-income strategist at West LB.
The benchmark 10-year U.S. Treasury note <US10YT=RR> rose
28/32 in price to yield 2.85 percent. The 2-year U.S. Treasury
note <US2YT=RR> gained 4/32 in price to yield 0.91 percent.
(Reporting by Chuck Mikolajczak, Chris Reese, Vivianne
Rodrigues and Rebekah Kebede in New York and Ian Chua, Jan
Harvey and Veronica Brown in London and Christoph Steitz in
Frankfurt; writing by Herbert Lash; Editing by Leslie Adler)
