* Stocks tumble on renewed Europe jitters, Korean row
* Euro nears four-year low versus U.S. dollar on debt woes
* Oil falls toward $67 a barrel on widening risk aversion
* Bond prices gain on European banking, Korean worries
(Adds close of European markets)
By Herbert Lash
NEW YORK, May 25 (Reuters) - Global stocks and commodity
prices fell sharply on Tuesday on fears that euro zone banking
troubles could spread to dampen the world recovery and as
tensions over the two Koreas added to investors' unease.
Oil fell below $68 a barrel at one point and gold prices
shot above $1,200 an ounce as investors fled riskier assets to
the safety of bullion, and the U.S. and Japanese currencies.
For details see: []
The euro fell to an 8-1/2-year low against the yen and
neared a four-year trough versus the dollar after the weekend
takeover of a small Spanish savings bank, CajaSur, sparked
worries the euro zone sovereign debt crisis is spreading.
[]
"People are worried the euro zone crisis will spread and
derail the global economic recovery," said Carsten Fritsch,
analyst at Commerzbank.
There were signs of stress in credit markets. Dollar
interbank lending rates rose and were seen pushing higher as
the debt crisis made banks wary of lending to European peers.
[]
Other measures of stress in money markets were at their
highest since the financial system emerged from the subprime
mortgage crisis a little more than a year ago.
"It's a run for dollar liquidity. Everybody wants to move
out of the euro and wants dollars, so the problem is access to
dollar liquidity is strained," said Patrick Jacq, a strategist
at BNP Paribas.
On Wall Street, the benchmark S&P 500 touched its lowest
point since early November 2009 and was trading down about 13
percent from its closing high in late April. Some traders said
they were looking for a 20 percent drop from that April peak,
which would mark a move into a bear market.
Asia stocks fell to multi-month lows and European shares
closed at their lowest level in nearly nine months, with banks
pressured by concerns over the health of the financial sector.
[]
Global stocks as measured by MSCI's all-country world index
<.MIWD00000PUS> fell 2.6 percent to their lowest since August
2009, while the more volatile emerging stocks index <.MSCIEF>
dropped 4.2 percent to 8-month lows.
Spanish banks Banco Santander <SAN.MC> and BBVA <BBVA.MC>
fell 3.9 percent and 4.5 percent, while Credit Agricole
<CAGR.PA> fell 6.7 percent and Lloyds <LLOY.L> shed 5 percent.
"What's driving the markets so badly at the moment is
concern about European banking risk, with a focus on savings
banks in Spain after the restructuring of CajaSur," said Bob
Parker, vice chairman of asset management at Credit Suisse.
The pan-European FTSEurofirst 300 <> index fell 2.4
percent to end at 949.87 points, its lowest close since early
September 2009.
At 12:30 p.m., the Dow Jones industrial average <> was
down 180.77 points, or 1.80 percent, at 9,885.80. The Standard
& Poor's 500 Index <.SPX> was down 18.50 points, or 1.72
percent, at 1,055.15. The Nasdaq Composite Index <> was
down 38.67 points, or 1.75 percent, at 2,174.88.
A rise of geopolitical tensions between the two Koreas
after North Korean leader Kim Jong-il ordered his military to
go on a combat footing exacerbated an already nervous market.
[]
"We still have all of the euro zone fears, and there are
increased tensions between North and South Korea," said Kim
Rupert, managing director of global fixed income analysis at
Action Economics in San Francisco.
London interbank offered rates for three-month dollars
fixed at a fresh 10-month high at 0.53625 percent, according to
the latest daily fixings by the British Bankers' Association.
U.S. Treasuries climbed on the flight to safety
bid.[]
The benchmark 10-year U.S. Treasury note <US10YT=RR> was up
16/32 in price, pushing its yield down to 3.14 percent, near a
year low.
Bank of America Merrill Lynch cut its oil demand growth
forecasts for 2010 to 1.5 million barrels per day from 2 mbpd
due to anticipated slower global economic growth in the second
half of the year.
U.S. light sweet crude oil <CLc1> fell $1.93 to $68.28 a
barrel.
The dollar was up against a basket of major currencies,
with the U.S. Dollar Index <.DXY> up 0.84 percent at 86.932.
The euro <EUR=> was down 0.63 percent at $1.2273, and
against the yen, the dollar <JPY=> was down 0.38 percent at
89.79 yen.
Spot gold prices <XAU=> rose $6.90 to $1,198.40 an ounce,
after earlier rising to $1,200.15.
The 19-commodity Reuters-Jefferies CRB index <.CRB> fell
almost 2 percent to its lowest level since early last
September. Copper futures lost over 4 percent.
Asia stocks fell to multi-month lows on fears that Europe's
sovereign debt woes will trigger a renewed crisis among
regional banks.
MSCI's broad measure of Asia-Pacific shares outside of
Japan <.MIAPJ0000PUS> tumbled 4.3 percent to touch its lowest
in 9 months. Japan's Nikkei average <> fell 3.1 percent to
mark a six-month closing low below a key support level at
9,500.
(Reporting by Wanfeng Zhou, Chris Reese in New York; Emelia
Sithole-Matarise, Emma Farge, Brian Gorman in London; writing
by Herbert Lash; Editing by Leslie Adler)
