* Oil slides below $39 as OPEC fails to stem bloodletting
* Long bond yields near historic lows in hunt for safety
* Dollar rebounds as euro dips, intervention fear hits yen
* U.S. stocks rise slightly as economic data not so grim
(Recasts with U.S. markets, changes byline, dateline; previous
LONDON)
By Herbert Lash
NEW YORK, Dec 18 (Reuters) - Concerns about falling global
demand pushed oil prices down on Thursday to their lowest level
since 2004, while longer-dated U.S. government bond yields fell
to fresh 50 year lows as investors rushed to safety.
The U.S. dollar rebounded from steep declines seen earlier
this week, rising the most against the yen in more than a
month, on heightened speculation the Japanese government may
intervene to halt the yen's advance.
The yen came off its highest level in more than 13 years
after Japanese authorities stepped up their rhetoric against a
stronger currency, which is hurting the nation's exporters.
The dollar was up against a basket of major currencies,
with the U.S. Dollar Index <.DXY> up 1.32 percent at 79.615.
Against the yen, the dollar <JPY=> rose 2.74 percent at 89.70.
The euro <EUR=> fell 0.77 percent at $1.429.
Stock prices in the United States were little changed,
though European stocks closed closed slightly down, as a
sell-off in commodity prices hit metal and energy shares.
U.S. bonds rallied for a third straight session with
long-dated yields shedding half a percentage point since the
Federal Reserve cut the target for its benchmark interest rate
on Tuesday to near zero percent in an attempt to pull the
economy out of recession.
A Fed pledge to purchase mortgage securities with the goal
of reviving the housing market, the center of the economic
malaise, along with its statement that it was considering
buying long-maturity Treasuries helped drive the rally.
"There is still reverberation from the Fed's dramatic
move," said Eric Lascelles, chief economics and rates
strategist at TD Securities in Toronto.
The yield on the benchmark 10-year U.S. Treasury note
<US10YT=RR> fell as low as 2.055 percent. The yield on the
30-year Treasury <US30YT=RR> fell to a record low of 2.563
percent.
Yields on 10- and 30-year euro zone government bonds fell
after Germany said it would not issue as much long-dated debt
next year as some in the market had expected.
U.S. economic data that was not as weak as feared helped
support Wall Street stock prices, but the decline in crude oilprices weighed on energy companies, driving the Dow Jondes
Industrial Average lower.
Chevron Corp <CVX.N> and Exxon Mobil <XOM.N> were the top
drags on the Dow.
Optimism was bolstered in part by economic data, including
a survey that showed factory activity in the U.S. Mid-Atlantic
region contracted in December, but at a less severe rate than
the previous month.
Stocks also got a lift from swelling confidence that U.S.
policy-makers were being aggressive in their efforts to jump
start the economy, which include the Fed's record rate cut and
a proposed stimulus package from President-elect Barack Obama.
"We're truly throwing the kitchen sink into the financial
markets in the expectation that something is going to grab and
finally get the wheels going," said Paul Nolte, director of
investments at Hinsdale Associates in Hinsdale Illinois.
The Dow Jones industrial average <> was down 36.88
points, or 0.42 percent, at 8,787.46 at middsession in New
York. The Standard & Poor's 500 Index <.SPX> was up 1.90
points, or 0.21 percent, at 906.32. The Nasdaq Composite Index
<> was up 0.87 points, or 0.06 percent, at 1,580.18.
A rally in defensive sectors, such as utilities and
telecoms, helped limit losses in European equities.
Carrefour <CARR.PA>, the world's second-biggest retailer,
sank 7.0 percent after warning it expects only slight growth in
2008 compared with previous guidance of about 7 percent.
The FTSEurofirst 300 <> index of top European shares
closed 0.17 percent lower at 827.12 points.
"There is more financial debris to come out of the
financial sector when fourth-quarter results come through,"
said Kevin Gardiner, head of Global Equity Strategy at HSBC
Investment Bank.
"And the near-term economic data is going to remain pretty
poor for quite a while, so we can't rule out new lows for
stocks, but we're optimistic that we won't probably see them."
In Germany corporate sentiment deteriorated sharply in
December, with manufacturers of export goods suffering acutely,
the closely watched Ifo survey showed.
French Prime Minister Francois Fillon said no European
country will avoid contraction in 2009.
Oil prices fell on supply concerns. Top forecasters are
predicting the first decline in world energy use since 1983 as
the global financial crisis gnaws at consumer and industrial
demand.
"Following OPEC's announcement to cut so aggressively,
market participants are (assessing) the degree of this move as
being indicative of just how weak demand is globally for crude
oil," said Chris Jarvis, senior analyst at Caprock Risk
Management in Hampton Falls, New Hampshire.
U.S. light sweet crude oil <CLc1> fell 59 cents to $39.47 a
barrel.
U.S. gold futures dropped below $850 in choppy trade as the
market took a breather after a recent sharp rally, but
underlying concerns about inflation should still support prices
in the near term.
The February gold contract <GCG9> falls $15.90 to $852.60
an ounce New York.
(Reporting by Deepa Seetharaman, Wanfeng Zhou, Richard Leong,
Robert Gibbons and Frank Tang in New York; Kirsten Donovan in
London and Blaise Robinson in Paris; writting by Herbert Lash)
