* Wall Street sharply lower amid fear after Lehman filing
* Short-term bond prices soar on flight-to-safety bid
* Oil prices dip to $95 a barrel as investors flee risk
* Dollar and yen rise amid risk aversion
(Adds midday market pricings)
By Herbert Lash
NEW YORK, Sept 15 (Reuters) - Global stocks tumbled, led by
financial shares, and oil fell sharply on Monday as Lehman
Brothers' bankruptcy filing caused investors to bail out of
risky assets and flock to safe havens such as government bonds,
gold and the Swiss franc.
The U.S. dollar rose amid the broad flight from risk, as
even amid worries related to Lehman and some other big U.S.
financial companies investors acted on fears that the growth
picture for other major economies was rapidly deteriorating.
Stock markets in the United States, Europe and Asia plunged
as Lehman's bankruptcy filing and Bank of America's <BAC.N>
weekend agreement to buy Merrill Lynch <MER.N> stirred concerns
about mounting global economic problems.
In New York, the Dow industrials lost more than 200 points,
while European shares slid to their lowest close in two months.
Most major Asian markets were closed for a holiday.
Shares of financial services companies plunged on concerns
about the impact of the credit crisis on their profit outlooks
and the broader economy. Such worries also led to perceptions
that energy demand would slow further, dragging down oil
prices.
Shares of Lehman <LEH.N> plunged more than 90 percent in
composite trade. American International Group <AIG.N> plummeted
more than 50 percent as investors grew increasingly nervous
after the insurer, once the world's most valuable insurer by
market value, failed to deliver a rescue plan.
Deep fears about the unfolding U.S. banking crisis drove up
demand for U.S. Treasury bills and pushed down yields, which
move in the opposite direction to prices, on an intense
flight-to-safety bid into ultra-short-term government paper.
The 1-month Treasury bill yield <US1MT=RR> fell to about
0.57 percent, its lowest level since April, from about 1.34
percent late on Friday.
"We are seeing cash temporarily moving into the U.S. dollar
amid heightened uncertainty and market turmoil, despite the
fact that much of the turmoil is centered here in the U.S.
financial markets," said Michael Woolfolk, senior currency
strategist at Bank of New York Mellon in New York.
Lehman, weighed by losses spawned by the U.S. mortgage
crisis, sought bankruptcy protection on Monday following a
failed last-minute scramble to find a buyer over the weekend.
Adding to investor worries was a report that AIG had asked
the Federal Reserve for a $40 billion bridge loan.
AIG shares traded at $6.30 in early afternoon after falling
as low as $3.50 earlier.
Before 1 p.m., the Dow Jones industrial average <> was
off 272.59 points, or 2.39 percent, at 11,149.40. The Standard
& Poor's 500 Index <.SPX> fell 27.68 points, or 2.21 percent,
at 1,224.02. The Nasdaq Composite Index <> shed 33.96
points, or 1.50 percent, at 2,227.31.
"It's impressive that we didn't get dumped 500 points, but
I still want to see how we close. We're not out of the woods
yet," said Joe Saluzzi, co-manager of trading at Themis Trading
in Chatham, New Jersey.
FINANCIALS DRAG ON EUROPEAN STOCKS
In Europe, financial stocks weighed heavily on markets.
The FTSEurofirst 300 <> index of top European shares
ended with a loss of 3.63 percent at 1,119.94 points, its
lowest close since July 16. Falling stocks led gainers by about
10-to-one, according to Reuters data.
HBOS <HBOS.L>, Britain's largest mortgage lender, plunged
17.6 percent, UBS <UBSN.VX> fell 14.5 percent and the Royal
Bank of Scotland <RBS.L> 10 percent.
A steep fall in crude oil prices <CLc1><LCOc1> hit index
heavyweight energy stocks such as Total <TOTF.PA>, down 5
percent, and Royal Dutch Shell <RDSa.L>, off 4.4 percent.
Oil plunged as much as $7 per barrel as investors sought
safer havens and on early signs that Hurricane Ike had spared
key U.S. energy infrastructure along the Gulf of Mexico.
"It has been quite a spectacular turn of events at Lehman
and Merrill and the stresses in the financial system are
sparking concerns about economic outlook and how that will
weigh on global energy demand," said David Moore, commodities
strategist for Commonwealth Bank of Australia.
In currency markets, the U.S. dollar index <.DXY>, which
measures the dollar's performance against a basket of
currencies, rose.
"It's all about risk aversion with the yen outperforming
... not surprisingly, the high yielders are leading the
declines," said Dustin Reid, foreign exchange strategist at ABN
Amro Bank in Chicago.
The high-yielding Australian and New Zealand currencies
fell sharply versus both the dollar and the Japanese yen.
Seen also as a safe-haven, the Swiss franc rose against the
dollar, which fell 0.8 percent to 1.1203 francs <CHF=>.
The dollar was up against major trading-partner currencies,
with the U.S. Dollar Index <.DXY> up 0.68 percent at 78.884.
Against the yen, the dollar <JPY=> was down 2.14 percent at
105.61.
European credit spreads were volatile on Monday but there
was little sense of panic.
"There doesn't seem to be any panic. It's strange," one
trader said. "European equities have reacted far worse to what
we have seen in U.S. shares."
The Markit iTraxx Crossover index <ITEXO5Y=GF> of 50 mostly
"junk"-rated credits was 55 basis points wider on the day but
some 50 basis points off record wides in March prior to the
fire-sale of Bear Stearns.
In the U.S. government debt market, the benchmark 10-year
Treasury note
The benchmark 10-year U.S. Treasury note <US10YT=RR> rose
46/32 to yeld 3.5403 percent. The 30-year U.S. Treasury bond
<US30YT=RR> added 58/32 to yield 4.21 percent.
Gold retreated from the highs it hit earlier in the session
after oil fell sharply.
U.S. light sweet crude oil <CLc1> fell $4.19 to $96.99 a
barrel.
Spot gold prices <XAU=> rose $17.65 to $781.10 an ounce.
(Additional reporting by Ellis Mnyandu, John Parry, Steven C.
Johnson and Lucia Mutikani in New York; and Matthew Robinson,
David Sheppard, Jan Harvey in London and Peter Starck in
Frankfurt; Editing by Leslie Adler)
