* Oil posts biggest loss since April as supplies jump
* U.S. dollar rises to two-week peak versus euro; yen up
* Shorter-dated U.S. debt falls after second poor auction
* U.S. stocks slide on China growth fears, durable goods
(Adds close of U.S. markets)
By Herbert Lash
NEW YORK, July 29 (Reuters) - Oil fell nearly 6 percent on
Wednesday in the biggest one-day slide since April after a big
rise in U.S. crude inventories, while a plunge in Shanghai's
stock market reignited the dollar's safe-haven appeal and
helped to push U.S. shares lower.
The U.S. dollar climbed to a two-week high against the euro
after a 5 percent drop in China's benchmark Shanghai Composite
Index <> and an unexpectedly weak U.S. durable goods
report sparked a flight to safety. <For related news click
[]>.
The Reuters-Jefferies CRB index <.CRB>, which tracks 19
mostly U.S.-traded futures markets, fell 2.66 percent as
investors questioned a commodity rebound over the past week on
hopes the worst of the financial crisis was over.
Crude inventories jumped 5.1 million barrels in the week to
July 24, according to government data, countering expectations
for a decline. []
U.S. fuel consumption dropped 4.1 percent against year-ago
levels over the past four weeks, while distillate stocks rose
to the highest level in nearly 25 years. []
"The build this week will put more pressure on oil,
especially given that we were already seeing return of risk
aversion across markets, with the U.S. dollar climbing and the
stock market lower," said Rachel Ziemba, lead energy analyst
for RGE Monitor in New York.
U.S. crude <CLc1> fell $3.88 to settle at $63.35 a barrel.
London Brent <LCOc1> fell $3.35 to $66.53 a barrel.
Shares of energy companies slid, with Chevron Corp <CVX.N>
falling 1.8 percent, the biggest drag on the Dow. The S&P
energy index <.GSPE> declined 2.1 percent.
The slide in Chinese stocks sapped investors' appetite for
risk and helped the dollar index <.DXY> recover from its lowest
level of 2009 while boosting the yen.
Both the yen and dollar benefit in times of risk aversion.
"The dollar is moving with the ebb and flow of risk
appetite," said Samarjit Shankar, director of global strategy
at Bank of New York Mellon in Boston.
"Today, risk is off and the dollar is gaining. It started
with the collapse in Shanghai stocks, and people are wondering
whether the foray into risk assets may have been overdone."
The dollar was up against a basket of major currencies,
with the U.S. Dollar Index up 0.83 percent at 79.505.
The euro <EUR=> was down 0.97 percent at $1.4039, while
against the yen, the dollar <JPY=> was up 0.60 percent at
95.11.
China's two biggest state-owned commercial banks capped
their 2009 lending targets, according to domestic media
reports, a move that will significantly slow Chinese credit
growth during the remainder of the year. [].
Natural resources stocks tracked commodity prices down,
with miner Freeport-McMoRan Copper & Gold Inc <FCX.N> off 5.2
percent. The S&P materials index <.GSPM> fell 2.1 percent.
"China has been a big driver of part of the global
recovery. Their stimulus is direct and quick," said Bobby
Harrington, managing director of Boston trading for UBS.
Slower growth in China's economy "could limit upside and
create downward momentum" in the U.S. stock market, he said.
The Dow Jones industrial average <> closed down 26.00
points, or 0.29 percent, at 9,070.72. The Standard & Poor's 500
Index <.SPX> fell 4.47 points, or 0.46 percent, at 975.15. The
Nasdaq Composite Index <> slid 7.75 points, or 0.39
percent, at 1,967.76.
Shorter-dated U.S. Treasuries fell, with their yields
briefly hitting five-week highs, after another poor auction
this week heightened fears over waning appetite for U.S.
government debt.
The weak bidding for a record $39 billion in five-year
notes caused shorter-dated U.S. government debt prices to fall,
but long-dated securities ended higher. They had climbed in
response to a decline on Wall Street and the drop in U.S.
durable goods.
The benchmark 10-year U.S. Treasury note <US10YT=RR> was up
4/32 in price to yield 3.67 percent. The 2-year U.S. Treasury
note <US2YT=RR> was down 3/32 in price to yield 1.17 percent.
New York gold futures settled lower as metals prices were
slammed after a second day of poor U.S. economic data suggested
a drawn out recovery.
Weak demand for new cars and civilian aircraft pulled U.S.
orders for costly durable goods down in June, even though an
underlying trend of improved manufacturing activity continued.
Spot gold prices <XAU=> fell $7.45 to $929.20 an ounce.
Japanese shares gained but stocks in Australia and Hong
Kong fell after strong run-ups in the past two weeks. The MSCI
Asia-Pacific index excluding Japan <.MIAPJ0000PUS> fell 1.8
percent. In Tokyo, the Nikkei average <> edged up 0.3
percent to its highest close in seven weeks.
(Reporting by Ellis Mnyandu, Wanfeng Zhou, Chris Reese in New
York; Brian Gorman, Joe Brock, Emelia Sithole-Matarise in
London; writing by Herbert Lash; Editing by Kenneth Barry)
