* World stocks mixed with economic data weak
* Safe-haven bid drives bonds and US dollar again
* Oil prices slip on reduced demand forecasts
By Nick Olivari
NEW YORK, Dec 9 (Reuters) - World stocks were mixed overall
on Tuesday as investors mulled whether recent gains have
staying power given rising corporate layoffs and disappointing
profit outlooks.
Risk aversion drove short term money market yields to zero
in the United States, and government bond yields fell with
investors nervous about the strains that year-end funding might
impose on the global financial system.
The safe-haven U.S. dollar and Japanese yen rose as
year-end book squaring continued to result in de-leveraging and
repatriation flows.
"Over the past several days, the stock market has staged a
fairly broad-based advance and this has occurred in the face of
some really awful economic news and continuing corporate
earnings warnings from a number of companies," said Michael
Sheldon, chief market strategist at RDM Financial in Westport,
Connecticut.
"At this point, it's only normal to see a bit of pause or
some hesitation and profit-taking in the markets."
In the United States, The Dow Jones industrial average
<> fell 237.59 points, or 2.66 percent, to 8,696.59. The
Standard & Poor's 500 Index <.SPX> lost 21.01 points, or 2.31
percent, to 889.69. The Nasdaq Composite Index <> ended
down 24.40 points, or 1.55 percent, at 1,547.34.
Shares of FedEx Corp <FDX.N> tumbled more than 16 percent
to $62.50 the day after the company cut its fiscal 2009 outlook
despite lower fuel prices, but said it expects to report a
better-than-expected second-quarter profit.
The broad S&P 500 index is up about 20 percent from the
eleven year low seen on Nov. 21 lows, but it remains down close
to 40 percent year-to-date.
U.S.-traded shares of Sony Corp gained 2.5 percent to
$20.55 <6758.T <SNE.N> after the Japanese company said it will
cut 16,000 jobs, the biggest cuts by an Asian company during
the financial crisis. [].
European shares closed 1.35 percent higher on Tuesday as
world automobile stocks advanced on hopes of a bailout package
for the U.S. car industry. The FTSEurofirst 300 <> index
of top European shares ended 11.5 points higher at 859.96
points.
BMW <BMWG.DE>, Daimler <DAIGn.DE>, Volkswagen <VOWG.DE> and
Fiat <FIA.MI> were up between 0.8 and 5.6 percent, helped by a
proposed U.S. plan to extend emergency loans worth up to $15
billion to U.S. automakers in exchange for tough oversight and
possibly a government stake in the automakers. []
British industrial output fell at its sharpest pace in
nearly six years in October, and revisions to previous months'
data suggested the economy might have contracted even faster in
the third quarter than initially thought. []
But despite this week's recovery in the European stock
market, investors remained nervous as gloomy economic news
painted a bleak picture.
"The market is just able to take a little bit of breath and
think: has this bad news that's coming through already been
discounted?," said Andrew Bell, head of research at Rensburg
Sheppards.
"It's going to take a while, probably months not weeks,
before the worst of the recession news has come through. But at
least investors are now showing a few signs of being prepared
to put in the balance the positives of the lower oil price and
policy stimulus."
The MSCI world stocks index <.MIWD00000PUS> ended off 0.68
percent at 219.37.
SAFE HAVEN BIDS DRIVE BOND YIELDS DOWN, DOLLAR UP
However, three-month U.S. Treasury rates dipped below zero
on Tuesday amid intense demand for safe U.S. government debt.
Fear was so pronounced that the U.S. Treasury sold $30
billion in four week bills on Tuesday at zero percent, meaning
investors were willing to hand over cash to the government and
receive no interest payments in return. For details, see
[]
"The safe-haven needs are extreme; people are just afraid
to risk their capital," said John Canavan, analyst at Stone and
McCarthy Research Associates in Princeton, New Jersey.
Two-year Treasury notes <US2YT=RR> climbed 6/32, and yields
fell to 0.84 percent from 0.94 percent on Monday.
The view that the Fed will use other methods in addition to
cutting short-term interest rates to ease monetary conditions
drove prices of long-dated Treasuries prices higher as well,
sending yields on those maturities toward five-decade lows.
The Fed is expected to cut short-term rates by at least
half a percentage point at its policy meeting next week.
Earlier though euro zone government bond yields rose on
Tuesday after a survey showed investor sentiment on the outlook
for the German economy improved this month, new supply met with
a lukewarm welcome, and as stock markets edged up in Europe.
However, with fears over the broader global economic
outlook still heightened, bond yields remained near the
multi-year lows they hit last week, with analysts saying the
current positive tone permeating financial markets may not
last.
The U.S. dollar rose against most major currencies on
Tuesday as more weak global economic data renewed fears of a
worsening crisis. The yen also rose broadly as investors sold
holdings of risky assets that were financed by borrowing the
Japanese currency at low interest rates.
Demand for risk was generally low after figures earlier on
Tuesday showed the Japanese economy contracted 0.5 percent in
July-September, far more than an initial reading of a 0.1
percent decrease [].
"Economic data around the globe is extremely weak.
Investors are very risk averse. They're just not willing to
jump into stocks," turning instead to Treasuries and the
dollar, said Matt Esteve, foreign exchange trader at Tempus
Consulting in Washington.
The euro slipped 0.1 percent to $1.2922 <EUR=> and the
dollar shed 0.8 percent to 92.11 yen <JPY=>.
The Bank of Canada dropped borrowing costs to 1.5 percent,
a 50 year low, on Tuesday and declared the Canadian economy in
recession [ID:nBAC000266.
The U.S. dollar rose 0.8 percent against its Canadian
counterpart to C$1.2646 <CAD=>.
U.S. crude oil futures ended lower on Tuesday as reduced
demand projections from the U.S. Energy Information
Administration reinforced concerns about slowing consumption in
a recession.
On the New York Mercantile Exchange, January crude <CLF9>
settled down $1.64, or 3.75 percent, at $42.07 a barrel,
trading from $41.83 to $44.57.
(Reporting by Leah Schnurr, Ellen Freilich, Steven Johnson,
Gene Ramos in New York, and Atul Prakash, Kirsten Donovan in
London)
