* Weak U.S. consumer confidence, housing sinks stocks
* German business confidence drops unexpectedly
* Flight-to-safety pushes U.S. dollar higher
By Daniel Bases
NEW YORK, Feb 23 (Reuters) - Investors sold shares across
the globe on Tuesday, unnerved by falling U.S. consumer
confidence and house prices that suggested the economy was
still fragile, while German business confidence fell
unexpectedly for the first time in almost a year.
A flight to safety bid fed into U.S. dollar strength which
in turn made commodities less attractive, pulling crude oil
prices from six week highs to below $80 a barrel and left spot
gold prices weaker to hover just $1,100 an ounce.
MSCI's All Country World stock index <.MIWD00000PUS> fell
0.41 percent from an earlier three-week high.
In the United States, concerns about business conditions
and the weak job market pulled consumer confidence down more
than expected in February to its lowest level in 10 months.
That exacerbated the decline in U.S. share prices, already
under selling pressure early on Tuesday.
The Dow Jones industrial average <> was down 78.60
points, or 0.76 percent, at 10,304.78. The Standard & Poor's
500 Index <.SPX> was down 11.76 points, or 1.06 percent, at
1,096.25. The Nasdaq Composite Index <> was down 27.91
points, or 1.24 percent, at 2,214.12
European share prices extended their losses on the U.S.
data. The pan-European FTSEurofirst 300 <> index fell
1.15 percent, with banks the worst performers.
The closely watched Standard & Poor's/Case-Shiller indexes
showed a surprising drop in December home prices, although the
annual rate of decline did slow. A Reuters survey expected no
change. [] []
"It's the second straight monthly decline in the
Case-Shiller (index). So on balance, I think it might be
generally negative for risk appetite and on the margin positive
for the dollar," said Omer Esiner, senior market analyst for
Travelex Global Business Payments in Washington.
The euro <EUR=> was down 0.32 percent at $1.3554 from a
previous session close of $1.3597. It is hovering just above a
nine-month low.
EURO ZONE WOES
Germany's much watched Ifo business climate index fell as a
result of harsh winter weather that weighed on the construction
and retail sectors and hinted Europe's largest economy could
revert to contracting in the first quarter.
The Ifo institute's business climate index fell to 95.2 in
February, lower than forecasts for 96.1. []
Adding to the gloom was a Fitch Ratings credit downgrade of
Greece's four largest banks, reminding investors of the
unresolved and worrying fiscal problems in Athens and the lack
of clarity from the euro zone on how it might aid one of its
members. []
The U.S. dollar rose against major currencies as measured
by the ICE Futures Exchanges's dollar index <.DXY> which was up
0.23 percent at 80.694 from a previous session close of
80.507.
Sterling fell sharply after Bank of England chief Mervyn
King said in parliamentary testimony the central bank could
increase quantitative easing if the economy worsens and the
recovery remained fragile. The BoE paused its 200-billion
sterling asset buying program earlier this month.
U.S. Treasury bond prices rose on the weak U.S. data. The
benchmark 10-year U.S. Treasury <US10YT=RR> rose 20/32 of a
point in price to yield 3.72 percent, ahead of an auction of
$44 bln 2-year notes by the U.S. Treasury later on Tuesday.
"The Treasury market is looking at the equity markets and
thinking that weaker equities might mean a flight to quality
bid for Treasuries," said Gary Thayer, chief macrostrategist at
Wells Fargo Advisors in St. Louis, Missouri.
German 2-year government bond yields hit a euro-lifetime
low of 0.906 percent <EU2YT=RR>.
U.S. light sweet crude oil <CLc1> fell $1.72, or 2.14
percent, to $78.59 per barrel, and spot gold prices <XAU=>
fell $6.10, or 0.55 percent, to $1107.20
BERNANKE EYED
U.S. Federal Reserve Chairman Ben Bernanke will testify to
Congress on Wednesday on the central bank's exit strategies,
but speculation of a near-term rise in U.S. interest rates
stemming from a discount rate increase last week has cooled.
San Francisco Fed President Janet Yellen was the latest
policymaker to stress the move to raise the rate on emergency
loans was not a sign for rapid monetary tightening.
The U.S. economy still needed extraordinarily low interest
rates, as inflation was "undesirably low" and growth would
likely be sluggish for several years, she said Tuesday.
(Additional reporting by Lynn Adler, Luciana Lopez, Steven C.
Johnson in New York, Paul Carrel in Berlin, Atul Prakash and
Jessica Mortimer in London)
