* U.S. stocks fall on credit jitters, poor economic data
* Uncertainty over revised U.S. bailout plan boosts bonds
* Oil falls below $96 barrel on U.S. crude inventory build
* U.S. manufacturing, jobs data heighten economic worry
(Recasts with U.S. markets, adds byline; changes dateline;
previous LONDON)
By Herbert Lash
NEW YORK, Oct 1 (Reuters) - Credit jitters and dour U.S.
economic news sent Wall Street lower and lifted safe haven
assets on Wednesday, overshadowing hopes the Senate will
approve revised plans to rescue the troubled financial sector.
Persistent credit market distress and a raft of
deteriorating economic data on both sides of the Atlantic
pushed investors into the safety of U.S. and euro-zone
government debt. Gold also rose on a renewed safe-haven bid.
Oil plummeted briefly below $96 a barrel on a increase in
crude inventories that was larger than expected and sliding
fuel demand. Copper slid to a 19-month low as data pointed to
slowing economic growth in Europe and the United States.
The dollar rallied as investors waited for the U.S. Senate
to a vote on a revised $700 billion bailout plan to tackle the
worst financial crisis since the Great Depression.
European stocks and U.S. bank shares rose ahead of the
evening vote, which would allow the U.S. Treasury to buy bad
mortgage-related assets from banks. The plan aims to ease tight
credit markets and avert a deepening global economic crisis.
However, the interbank cost of borrowing dollars over three
months rose as short-term lending remained nearly frozen and
investors anticipated an intensification of global financial
strains at the end of the year. Interbank rates remained stuck
near record levels.
"Yes, we survived quarter-end but we are still looking at
some type of potential Armageddon," said T.J. Marta,
fixed-income strategist with RBC Capital Markets in New York.
Economic reports darkened the picture for U.S. employment
and manufacturing. U.S. factory activity shrank in September to
its lowest level since the 2001 recession and private employers
shed jobs for the third time in four months as the worsening
financial crisis tightened its grip on the U.S. economy.
Shares of heavy-equipment manufacturer Caterpillar <CAT.N>,
an economic bellwether, slid more than 6 percent and energy
shares, such as Chevron <CVX.N>, fell along with crude prices,
making the energy sector a top drag on the broad U.S. market.
"The backdrop for the stock market today is an intensifying
concern to what extent the global economy will slow down. But
financials are up on expectations we'll get a bailout package
this time around," said Matt Kaufler, a portfolio manager with
Clover Capital Management in Rochester, New York.
Before 1 p.m., the Dow Jones industrial average <> was
down 8.36 points, or 0.08 percent, at 10,842.30. The Standard &
Poor's 500 Index <.SPX> was off 3.73 points, or 0.32 percent,
at 1,162.63. The Nasdaq Composite Index <> was down 15.15
points, or 0.72 percent, at 2,076.73.
European shares ended higher. The FTSEurofirst 300 <>
index of top European shares closed 0.85 percent higher at
1,072.64. The benchmark has lost 29 percent so far this year.
Banks were among the top contributors to the index after
recent losses on uncertainty over the U.S. rescue package.
Fortis <FOR.BR> rose 13.7 percent, Dexia <DEXI.BR> advanced 9.7
percent and Lloyds TSB <LLOY.L> jumped 10.4 percent.
The dollar rose against a basket of major currencies, with
the U.S. Dollar Index <.DXY> up 0.28 percent at 79.533.
The euro <EUR=> fell 0.46 percent at $1.4037, and against
the yen, the dollar <JPY=> was unchanged at 106.03.
Adding to the dollar's attractiveness against the euro and
credit market tightness, manufacturing activity in the
euro-zone fell to a near seven-year low in September.
The UK Purchasing Managers' Index fell to the lowest since
the survey started in 1992, fanning fears that Britain has
entered its first recession since the early 1990s.
"It is obvious that the credit market is affecting the real
economy and this data confirms that. So markets are hopeful
more than ever that the bailout package would pass," said
Matthew Strauss, senior currency strategist at RBC Capital
Markets in Toronto.
The benchmark 10-year U.S. Treasury note <US10YT=RR> rose
24/32 to yield 3.73 percent, and the 2-year U.S. Treasury note
<US2YT=RR> added 9/32 to yield 1.82 percent.
U.S. light sweet crude oil <CLc1> fell $1.48 to $99.16 a
barrel.
Crude oil inventories in the United States, the world's
largest oil consumer, increased by 4.3 million barrels last
week, data from the Energy Information Administration showed.
Analysts had expected a 2.4 million barrel increase.
Spot gold prices <XAU=> rose $14.45 to $884.40 an ounce.
Copper for delivery in three months <MCU3> on the London
Metal Exchange hit $6,120 a tonne, the lowest since March 2007.
Many Asian markets were closed for holidays, including
China, Hong Kong and Singapore.
Japan's Nikkei share average <> rose 1 percent, after
posting its biggest monthly decline in eight years in
September.
(Reporting by Ellis Mnyandu, Chris Reese, Nick Olivari and
Gertrude Chavez-Dreyfuss in New York and Atul Prakash, Ikuko
Kao, Emelia Sithole-Matarise, Humeyra Pamuk and Pratima Desai
in London; Writing by Herbert Lash; Editing by Tom Hals)
