(Recasts with U.S. markets; changes dateline; previous
LONDON)
By Herbert Lash
NEW YORK, April 29 (Reuters) - Global stocks fell on
Tuesday on signs a credit crisis is still sapping U.S. and
European economic strength and financial shares as investors
turned edgy ahead of a U.S. interest rate decision.
News that U.S. consumer confidence slid to a five-year low
in April and signs that more homeowners are falling behind in
their mortgage payments heightened fears of a U.S. recession.
U.S. Treasury debt prices rose as stocks eased, with
investors turning to bonds as a safe-haven investment the day
before the Federal Reserve is expected to cut interest rates.
Oil fell more than $2 a barrel, retreating further from a
record high hit on Monday, as the dollar firmed and a strike
ended at Britain's Grangemouth refinery.
European shares ended sharply lower, breaking four days of
gains amid a decline in banking and miners' stocks. Regulators'
rejection of a new cholesterol drug from Merck & Co Inc <MRK.N>
made the pharmaceuticals bellwether the biggest drag on the Dow
and benchmark Standard & Poor's 500 Index <.SPX>
Homebuilder shares also took a dive, with the Dow Jones
home construction index <.DJUSHB> sliding more than 3 percent.
With fears of recession mounting, the Fed's outlook on the
economy took on particular urgency. Fed policy-makers begin a
two-day meeting on Tuesday.
"We are seeing the manifestation of trends that were set
into place last year, namely, high energy prices conspiring
with declining home values and stress in the financial markets
to weigh on the consumer," said Matthew Kaufler, portfolio
manager at Clover Capital Management in Rochester, New York.
The Dow Jones industrial average <> was down 26.79
points, or 0.21 percent, at 12,844.96. The S&P 500 <.SPX> was
down 4.65 points, or 0.33 percent, at 1,391.72. The Nasdaq
Composite Index <> was down 6.65 points, or 0.27 percent,
at 2,417.75.
A deepening housing slump pressured the earnings of
financial companies such as Countrywide Financial Corp <CFC.N>,
the largest U.S. mortgage lender. Countrywide posted a
surprisingly large $893.1 million first-quarter loss and took
more than $3 billion of charges for write-downs and bad loans.
Countrywide said about one in 11 borrowers and more than
one in three subprime borrowers have fallen behind on home loan
payments, both nearly twice as many as a year earlier.
In another negative sign, finance company GMAC said its
first-quarter loss nearly doubled as more customers fell behind
on mortgage payments. The company warned that it might not be
profitable until well into 2009, later than expected.
U.S. Treasury debt prices rose. The benchmark 10-year U.S.
Treasury note <US10YT=RR> was up 10/32 to yield 3.79 percent.
The 2-year U.S. Treasury note <US2YT=RR> was up 2/32 to yield
2.31 percent. The 30-year U.S. Treasury bond <US30YT=RR> was up
22/32 to yield 4.52 percent.
In Europe, HBOS Plc <HBOS.L>, Britain's biggest mortgage
lender, sought fresh funding and Deutsche Bank AG <DBKGn.DE>
suffered its first quarterly loss in years.
March figures from the Bank of England showed the lowest
level of monthly mortgage approvals since the central bank
began measuring them in 1999, evidence that a UK housing
downturn is gathering pace.
HBOS asked shareholders for 4 billion pounds ($7.9 billion)
via a rights issue as it grapples with toxic assets and a poor
home loans market. Deutsche Bank wrote down 2.7 billion euros
($4.2 billion) and abandoned its 2008 profits target.
Europe's biggest insurer, Allianz SE <ALVG.DE>, was also
hit by the credit crisis. It wrote down 900 million euros.
The pan-European FTSEurofirst 300 <> index ended down
0.8 percent at 1,328.45 points, with British shares faring less
poorly than German and French peers as surging earnings from
rising energy prices lifted BP <BP.L> and Shell <RDSa.L>.
BP and Shell were the top two gainers on the index, jumping
more than 5 percent.
Oil retreated from Monday's record high of $119.93 a
barrel, helped by the resumption of talks between Nigerian
unions and Exxon Mobil to end a six-day strike.
U.S. light sweet crude oil <CLc1> fell $3.47, or 2.92
percent, to $115.28 per barrel.
Gold hit a one-month low on a firmer dollar and weaker oil
prices, with investors unwinding their trading positions ahead
of this week's Federal Reserve meeting.
Gold often takes its cue from movements in the dollar
because of its role as an alternative investment to currencies,
stocks and bonds. The outcome of the Fed meeting would set the
tone for currencies and precious metals, dealers said.
Spot gold prices <XAU=> fell $19.70, or 2.21 percent, to
$872.80.
The dollar briefly extended gains against the euro after
U.S. consumer confidence in April came in broadly in line with
market expectations.
The dollar was up against major trading-partner currencies,
with the U.S. Dollar Index <.DXY> up 0.36 percent at 72.761.
The euro <EUR=> was down 0.47 percent at $1.5586, and against
the yen, the dollar <JPY=> was down 0.46 percent at 103.59.
Asian stocks stalled near three-month highs ahead of the
Fed's rate decision and economic data that could draw a line
under the downturn or send markets lower.
The nervous wait kept buyers at bay and Asian stocks
outside Japan <.MIAPJ0000PUS> slipped 0.3 percent.
(Reporting by Ellis Mnyandu, Chris Reese, Gertrude
Chavez-Dreyfuss and Nick Olivari in New York and Santosh Menoni
and Atul Prakash in London; Editing by Dan Grebler)
