* Bonds rise as stocks skid on recession, earnings fears
* Oil slips despite expected OPEC production cut on Friday
* Euro at three-year low vs yen; dollar index scales high
(Adds close of U.S. markets)
By Herbert Lash
NEW YORK, Oct 21 (Reuters) - Fears of a global recession
drove stock and commodity markets lower on Tuesday despite a
further thawing in credit markets and more steps by authorities
around the world to bolster investor confidence.
Downbeat outlooks from some key U.S. companies helped
revive a bid for safety, lifting the price of U.S. government
debt and spurring the U.S. dollar to a one-and-a-half-year peak
against a basket of major currencies.
Gold futures dropped as much as 4 percent as the dollar's
rally and relatively calm global markets dimmed the metal's
appeal as an alternative investment.
A sharp pullback in commodity prices and commodity-linked
stocks on global growth concerns and a potential worldwide
recession sent a pall over financial markets, despite renewed
efforts to loosen still-tight credit.
"It's a foregone conclusion that the economy is slowing and
that companies are going to be issuing downbeat forecasts,"
said Richard Sparks, senior equities analyst at Schaeffer's
Investment Research in Cincinnati, Ohio.
The Dow industrials fell 2.5 percent, while the Nasdaq
skidded over 4 percent, outpacing losses in European markets.
Japan and France extended more help to banks, the
International Monetary Fund prepared to intervene in trouble
spots around the world, and the U.S. Federal Reserve devised a
new plan to inject liquidity into troubled money markets.
Interbank lending costs fell further, offering tentative
signs of renewed confidence in a battered global banking
system. Weeks of bailouts and rescue plans appear to have
cooled the worst financial crisis since the Great Depression.
Commodity prices pointed to recession worries. Oil fell 4.5
percent to under $71 a barrel and copper slipped to lows last
seen in January 2006 after China, the largest consumer of
industrial metals, saw growth slow in the third quarter.
Both copper and oil are trading more than 50 percent lower
than the peaks they reached in July.
"The deleveraging story will continue and remain in place
for quite some time," said Audrey Childe-Freeman, a currency
analyst at Brown Brothers Harriman in London. She referred to
the sale of distressed assets to cut debt or cover losses.
U.S. stocks skidded as companies cut their earnings
outlooks. Automotive stocks pulled European shares lower in
another sign of falling demand, and energy shares on both sides
of the Atlantic tracked the fall in crude prices.
The Dow Jones industrial average <> closed down 231.77
points, or 2.50 percent, at 9,033.66. The Standard & Poor's 500
Index <.SPX> fell 30.36 points, or 3.08 percent, at 955.04. The
Nasdaq Composite Index <> slipped 73.35 points, or 4.14
percent, at 1,696.68.
Tech bellwether Texas Instruments Inc <TXN.N> warned of
slowing sales for its widely used analog chips, while chemical
maker DuPont Co <DD.N> cut its full-year forecast on weakening
demand in North American and Western European markets.
Texas Instruments slipped 6.3 percent and DuPont gave up 8
percent.
Freeport-McMoRan Copper & Gold Inc <FCX.N>, the largest
publicly traded copper producer, said quarterly profit fell by
one-third and it would curtail planned mine expansions because
of weak metals prices. Freeport shares fell 10.8 percent to
$32.74, and are now off almost 75 percent since peaking at
$127.23 in May.
Caterpillar Inc <CAT.N> ,a maker of excavators and
bulldozers, also missed profit expectations, sparking a drop of
5.1 percent in its stock price.
The S&P energy index <.GSPE> shed 4.3 percent.
In Europe energy shares tracked weaker crude prices and
automobile stocks slipped on demand worries and rising costs.
The FTSEurofirst 300 <> index of top European shares
ended down 0.47 percent at 923.93 points.
Volkswagen <VOWG.DE> fell 12.4 percent, taking the most off
the FTSEurofirst index.
Oil was pressured by expectations a global recession will
crush demand and limit the impact of any supply cuts this week
by the Organization of Petroleum Exporting Countries.
U.S. crude for November delivery <CLc1>, which expired on
Tuesday, settled down $3.36 at $70.89 a barrel.
London Brent crude <LCOc1> traded down $2.97 at $69.06 at
3.53 p.m.
The benchmark 10-year U.S. Treasury note <US10YT=RR> rose
one full point in price to yield 3.74 percent, while the 2-year
U.S. Treasury note <US2YT=RR> added 6/32 in price to yield 1.61
percent.
The dollar gained against a basket of major currencies,
with the U.S. Dollar Index <.DXY> up 1.66 percent at 84.355.
Against the yen, the dollar <JPY=> fell 1.64 percent at
100.22.
The euro <EUR=> fell 2.08 percent at $1.3064.
Gold futures for December delivery <GCZ8> settled down $22
at $768 an ounce in New York.
MSCI's all-country world stock index <.MIWD00000PUS>, a
broad measure of global stock market performance, was off 1.4
percent after gaining for two days in a row.
(Reporting by Kristina Cooke, Richard Leong, Lucia Mutikani,
Frank Tang, Barani Krishnan and Edward McAllister; and Joe
Brock, Jane Merriman and Joanne Frearson in London; Writing by
Herbert Lash; Editing by Leslie Adler)
