(Recasts with U.S. markets, changes dateline; previous
LONDON)
By Herbert Lash
NEW YORK, April 11 (Reuters) - Global stocks fell sharply
and government bond prices rallied on Friday after General
Electric posted disappointing earnings that jolted investors
and cemented a view that the U.S. economy was in a recession.
The dollar fell broadly as GE's results and profit warning,
in tandem with a worse-than-expected deterioration in consumer
confidence, undermined the view that a U.S. slowdown would be
brief and that the worst of a credit crisis might be over.
Oil fell after the International Energy Agency cut its oil
demand growth forecast for 2008, and gold drifted lower despite
the dollar's decline.
GE shares slumped nearly 12 percent, their worst decline
since the stock market crash of October 1987. The conglomerate,
viewed as an economic bellwether because of the range of its
businesses, reported an unexpected 6 percent decline in
earnings and lowered its forecast for 2008.
In another sign of the bleak outlook, U.S. consumer
confidence in early April fell to its lowest since 1982, diving
deeper into recessionary territory on heightened worries over
inflation and jobs, according to the Reuters/University of
Michigan Surveys of Consumers.
Euro zone government bond futures staged their biggest
one-day percentage rise in a month on renewed flight-to-safety
flows and U.S. Treasury debt prices rose sharply after the GE
results and weak consumer confidence survey.
"Surprises like the GE earnings decline just add to the
speculation that the U.S. economy has not bottomed," said Kevin
Giddis, managing director of fixed-income trading with Morgan
Keegan in Memphis.
"There is a growing list of new variables which could force
the Fed to stay in the easing mode a little while longer," he
said.
Traders now see slightly more than a 50 percent chance that
the Federal Reserve will lower its fed funds target rate by
half a percentage point at the end of April, up from about 40
percent a week ago.
In the absence of a high-profile rescue like that of Bear
Stearns & Cos last month, investors have become complacent,
said Ashraf Laidi, chief FX strategist at CMC Markets in New
York.
"People have an erroneous sense of comfort and it is
absolutely ridiculous to think the worst is behind us," Laidi
said.
The Dow Jones industrial average <> was down 176.11
points, or 1.40 percent, at 12,405.87. The Standard & Poor's
500 Index <.SPX> fell 18.67 points, or 1.37 percent, to
1,341.88. The Nasdaq Composite Index <> lost 40.90 points,
or 1.74 percent, to 2,310.80.
European stocks closed down 1.5 percent in the biggest
one-day drop since mid-March.
The FTSEurofirst 300 <> index of top European shares
closed 1.4 percent lower at 1,284.71 points, its lowest close
since March 31 and its fourth straight negative session. The
index ended the week with a loss of 2.6 percent.
"GE's results confirm our view that the (earnings)
consensus is still way too high for 2008 and that forecast
downgrades will continue and dampen the market's recent
enthusiasm," said Romain Boscher, head of equity management at
Groupama Asset Management in Paris.
Industrial stocks took a beating, with Siemens <SIEGn.DE>
losing 3.4 percent.
Earlier in Asia, stocks rose, with Japan's Nikkei up almost
3 percent, as chipmakers extended a rally on expectations a
slump in the sector may soon end.
The MSCI's measure of Asian stocks outside Japan
<.MIAPJ0000PUS> rose 0.9 percent.
Japan's Nikkei average <> gained 2.9 percent.
The benchmark 10-year U.S. Treasury note <US10YT=RR> rose
23/32, with the yield at 3.4656 percent. The 2-year U.S.
Treasury note <US2YT=RR> was up 6/32, with the yield at 1.7499
percent. The 30-year U.S. Treasury bond <US30YT=RR> gained
32/32, with the yield at 4.2925 percent.
In currencies, the dollar was down against a basket of
major trading-partner currencies, with the U.S. Dollar Index
<.DXY> down 0.37 percent at 71.882 from a previous session
close of 72.148.
The euro <EUR=> was up 0.41 percent at $1.5807 from a
previous session close of $1.5742. Against the Japanese yen,
the dollar <JPY=> was down 0.85 percent at 100.96 from a
previous session close of 101.83.
U.S. light sweet crude oil <CLc1> fell 99 cents, or 0.9
percent, to $109.12 per barrel, and spot gold prices <XAU=>
fell $6.80, or 0.73 percent, to $921.60.
(Additional reporting by Jennifer Coogan, Lucia Mutikani,
Richard Leong in New York and Atul Prakash, Ikuko Kao in
London; Editing by Dan Grebler)
