(Adds close of U.S. markets)
By Herbert Lash
NEW YORK, April 8 (Reuters) - Global stocks fell on Tuesday
as slumping housing markets on either side of the Atlantic and
worries at the Federal Reserve in March that a severe downturn
is possible rekindled recession fears.
Minutes of the March 18 meeting of Fed policy-makers and a
twice-yearly assessment of global financial markets by the
International Monetary Fund hit investors already sullied by
disappointing earnings and a big mortgage-related loss.
Sterling fell to an 11-year low on weak British housing
data and the dollar rose against a basket of currencies on
concern the U.S. economic slump may spread to other countries
and prompt their central banks to cut interest rates.
Oil prices eased on profit-taking, gains in the dollar and
expectations that a government report on Wednesday will show an
increase in U.S. crude stockpiles due to rising imports.
A prediction by the U.S. government's energy forecaster
that U.S. gasoline demand is likely to shrink this summer for
the first time since 1991 reflected higher prices, but also
pointed to another sign of U.S. economic weakness.
The global credit crisis returned to haunt markets, a day
after news of a pending capital infusion into troubled U.S.
savings and loan Washington Mutual buoyed investor sentiment.
The IMF said turmoil in credit markets could spread -- with
losses possibly approaching $1 trillion -- and cautioned that
risks to global economic growth had increased.
The Fed minutes showed the U.S. central bank's staff
projected real gross domestic product would contract in the
first half and warned a downturn could be prolonged and
severe.
But given the gloomy assessment, investors said the stock
market held up relatively well because many believe the worst
of the global credit crisis has passed.
"The financial sector is hit by the news on Washington
Mutual, but in the overall context of recent volatility, this
is a pretty mild setback relative to what we have seen in the
last six months," said Charles Lieberman, chief investment
officer of Advisors Capital Management, LLC in Paramus, New
Jersey.
Shares of WaMu <WM.N>, as the U.S. thrift is known, sank
after it received a $7 billion capital infusion, slashed its
dividend and said it will post a first-quarter loss that is
larger than Wall Street expected. The stock fell nearly 10
percent.
The Dow Jones industrial average <> closed down 35.99
points, or 0.29 percent, at 12,576.44. The Standard & Poor's
500 Index <.SPX> lost 7.00 points, or 0.51 percent, to end at
1,365.54. The Nasdaq Composite Index <> fell 16.07 points,
or 0.68 percent, to 2,348.76.
European shares snapped a two-day winning streak to end
lower as investors fretted about more credit-related headwinds
for banks and the prospect of weakening earnings at
non-financials.
The FTSEurofirst 300 <> index of top European shares
ended down 0.8 percent at 1,318.39 points.
Banks took most points off the benchmark, with HBOS
<HBOS.L> down 1.9 percent, Natixis <CNAT.PA> falling 2.2
percent, Dexia <DEXI.BR> losing 2.8 percent and Deutsche
Postbank <DPBGn.DE> down 3.7 percent.
The weak housing front again bedeviled both U.S. and
European investors.
British house prices fell in March at their sharpest pace
since the recession of the early 1990s, the country's largest
mortgage lender said.
In the United States, pending sales of previously owned
homes fell a bigger-than-expected 1.9 percent in February to
the lowest level since data was first compiled in 2001,
according to a report from a real estate trade group.
Asian shares extended losses as banks and other financials
were pressured by nagging worries about further write-downs.
Australia and New Zealand Banking Group Ltd <ANZ.AX> fell in
Sydney and Mizuho Financial Group <8411.T> slipped in Tokyo.
Tokyo's benchmark Nikkei index <> ended down 1.5
percent after hitting a five-week high on Monday.
Some investors held back ahead of economic indicators, such
as Japanese machinery orders <ECONJP>, later this week.
Stocks elsewhere in Asia, as measured by MSCI's index
<.MIAPJ0000PUS>, were down 1 percent.
Oil fell, with U.S. crude futures <CLc1> settling down 59
cents to $108.50, the day after refinery trouble in Europe
spurred a $3 jump.
London Brent crude <LCOc1> shed 80 cents to $106.34.
In currency trading, the dollar rose against a basket of
major trading-partner currencies, with the U.S. Dollar Index
<.DXY> up 0.05 percent to 72.252.
The euro <EUR=> gained 0.08 percent to $1.5714, while
against the yen, the dollar <JPY=> rose 0.05 percent to
102.47.
Gold slipped as investors took profits from recent highs,
awaiting central banks' rate announcements later in the week
that could give market direction.
Spot gold prices <XAU=> fell $4.60, or 0.50 percent, to
$915.40.
U.S. Treasury debt prices were mixed.
The benchmark 10-year U.S. Treasury note <US10YT=RR> was
down 4/32, with the yield at 3.5602 percent. The 2-year U.S.
Treasury note <US2YT=RR> was up 3/32, with the yield at 1.8754
percent. The 30-year U.S. Treasury bond <US30YT=RR> was down
16/32, its yield at 4.386 percent.
