* Financial shares lead Europe and U.S. stocks lower
* Government debt turns up as central bank euphoria fades
* Gold rises on safety bid; oil falls, supply concerns ebb
(Adds close of European markets, updates U.S. markets, updates
pricings)
By Herbert Lash
NEW YORK, Sept 18 (Reuters) - Renewed anxiety over the
outlook for financial firms dragged down global stocks on
Thursday, as a move by the world's leading central banks to
thaw a worldwide credit crunch failed to stem fears and
investors took refuge in safe havens like gold and bonds.
Six major central banks injected $180 billion of extra
liquidity into financial markets to calm panicky investors.
The reprieve proved temporary as investors stayed alert for the
latest victim of a credit crisis that is giving Wall Street its
most dramatic transformation since the Great Depression.
Worries about the ability of the two remaining independent
U.S. banks, Morgan Stanley <MS.N> and Goldman Sachs <GS.N>, to
survive as stand-alone entities overtook enthusiasm on the move
by the central banks, which had initially lifted stocks in
Europe and the United States.
The U.S. dollar fell to session losses against the yen
after global shares surrendered gains and gold extended
Wednesday's rally, with U.S. gold futures <XAU=> rising above
$900 an ounce.
In a sign of tight credit and market fear, Putnam Funds
said it closed its prime money market fund because of heavy
redemptions from institutional investors on Wednesday. Credit
quality of the fund was not an issue, Putnam said.
"There are no safe havens right now, not a day after we go
down 5 percent," said Anthony Conroy, head trader for BNY
ConvergEx in New York.
Central banks' efforts to restore confidence were helpful,
"but fear and greed dictate the short-term market and that's
what we are living through right now," Conroy said. "There's a
lot of anxiety, and anxiety breeds volatility."
Before 1 p.m., the Dow Jones industrial average <> was
down 112.68 points, or 1.06 percent, at 10,496.98. The Standard
& Poor's 500 Index <.SPX> was down 19.11 points, or 1.65
percent, at 1,137.28. The Nasdaq Composite Index <> was
down 26.13 points, or 1.24 percent, at 2,072.72.
The top three drags on the benchmark S&P 500 were Goldman
Sachs <GS.N>, State Street Corp <STT.N> and Morgan Stanley
<MS.N>, all down more than double digits.
The biggest decliner among New York Stock Exchange-listed
companies was life and mortgage insurer Genworth Financial Inc
<GNW.N> ,down almost 40 percent.
The investment portfolio of State Street, one of the
largest custodian banks in the world, came under question.
"Investors are taking the approach that, 'Shoot first, ask
questions later.' That's the reason the stock is off as much as
it is today," said Gerard Cassidy, an analyst at RBC Capital.
European stocks closed lower after reversing gains in late
trade.
HBOS Plc <HBOS.L> jumped 17 percent after Lloyds TSB
<LLOY.L> said it would take over the embattled UK lender in a
$22 billion deal the government helped. Lloyds fell 15.1
percent.
The FTSEurofirst 300 <> index of top European shares
closed down 0.6 percent at 1,063.69 points, its fourth straight
session of losses.
The index has lost about 9 percent so far this week, and is
on track for its worst week since the attacks of Sept. 11,
2001.
"There are a lot of pending issues in the financial sector,
and probably a lot of bad surprises in the pipeline," said
Jean-Claude Petit, head of equities at Barclays Wealth Managers
France.
Oil fell after earlier rising above $100 as U.S. refiners
made progress in restarting idled operations following
Hurricane Ike.
U.S. crude <CLc1> fell 79 cents at $96.37 a barrel at 1644
GMT, after touching a high of $102.24 earlier. It had gained $6
on Wednesday. London Brent crude <LCOc1> traded down 45 cents
to $94.39 a barrel.
The dollar dipped to a two-week low against the euro, while
the yen also fell.
The dollar fell against major currencies, with the U.S.
Dollar Index <.DXY> off 0.64 percent at 77.739. Against the
yen, the dollar <JPY=> fell 0.07 percent at 104.25.
The euro <EUR=> rose 0.84 percent at $1.4423.
The benchmark 10-year U.S. Treasury note <US10YT=RR> rose
14/32 to yield 3.37 percent. The 30-year U.S. Treasury
bond<US30YT=RR> added 6/32 to yield 4.08 percent.
Asian stocks overnight fell. Japan's Nikkei share average
<> ended down 2.2 percent to a three-year low. The MSCI
Asia-Pacific ex-Japan stocks index <.MIAPJ0000PUS> fell 3.7
percent after earlier touching the lowest since July 2006.
(Reporting by Ellis Mnyandu, Burton Frierson, Gertrude
Chavez-Dreyfuss in New York; David Sheppard in London and
Blaise Robinson in Paris; Writing by Herbert Lash; Editing by
Leslie Adler)
