* Global stocks mostly sag as bailout debate continues
* U.S. oil rises, fuel inventories drop on Ike disruptions
* U.S. government debt advances on bailout plan worries
* Euro zone bonds gain; weak data shows recession looms
* Dollar slips against euro but gains versus yen
(Recasts with U.S. markets, adds byline; changes dateline;
previous LONDON)
By Herbert Lash
NEW YORK, Sept 24 (Reuters) - The U.S. dollar fell and
global stocks were mostly lower on Wednesday as unease about a
U.S. government bailout kept investors on edge and boosted
safe-havens like short-term debt.
Concerns over when Congress will act on the U.S.
government's proposed $700 billion rescue of troubled banks
eclipsed news after markets closed on Tuesday of Warren
Buffett's $5 billion investment in Goldman Sachs <GS.N>.
Shares rose in Asia on the Buffett news but European equity
investors focused on worries over about the bailout plan, while
and the S&P 500 and Dow were little changed after midday in New
York. The Nasdaq rose on the hope business spending on
technology will rise when the bailout is approved.
Investors marched into cash and low-risk assets, sending
one-month yields on U.S. Treasury bills to below zero at one
point and giving gold a lift initially. The massive bailout
will likely spur inflation down the road as the dollar
weakens.
For sure, gains in safe-haven assets and the decline in
stocks were capped by cautious optimism about Buffett's bet on
Goldman, seen as a vote of confidence in the banking sector.
But worries about the passage of the bailout intensified
safety bids for short-term debt as well as longer-dated bonds.
Efforts to repair the banking sector helped lift the price of
euro zone debt, as did a slump in German business sentiment.
"There's a tremendous amount of anxiety whether this bill
will get passed," said Thomas di Galoma, head of U.S.
government bonds at Jefferies & Co. in New York.
Investors worried that congressional wrangling could delay
or weaken the Bush administration's rescue plan. Without
action, investors fear banks won't resume lending, risking more
harm to the economy and the outlook for corporate profits.
"The resistance we're seeing in Washington is
understandable but frightening at the same time. The longer
this drags on and the more bickering we see, the more
frightening it is," said Jack Ablin, chief investment officer
at Harris Private Bank in Chicago.
Before 1 p.m., the Dow Jones industrial average <> was
down 23.18 points, or 0.21 percent, at 10,830.99. The Standard
& Poor's 500 Index <.SPX> was down 1.47 points, or 0.12
percent, at 1,186.75. The Nasdaq Composite Index <> was up
8.20 points, or 0.38 percent, at 2,161.53.
Shares of economic bellwether General Electric <GE.N> ,
down 4 percent at $23.96, were the top drag on the S&P 500, and
extended a 4.6 percent slide on Tuesday. The company's finance
arm, GE Capital, accounts for about half of General Electric's
profits.
Among Nasdaq gainers, software maker Oracle Corp <ORCL.O>
rose 1.6 percent to $20.01.
European stocks ended lower, with mining and energy shares
among the biggest losers. Anglo American <AAL.L> lost 6 percent
and Xstrata <XTA.L> fell 5.3 percent.
The FTSEurofirst 300 <> index of top European shares
closed 0.63 percent lower at 1,101.60 points, falling for the
third consecutive session.
"The bailout legislation is absolutely crucial," said Alan
Harris, investment manager at Charles Stanley, in Hove,
England. "Desperate measures are required in desperate times."
Euro zone government debt rose as weakening business morale
in Germany, France and Italy offered more evidence that the
region is sinking into recession, and could lead the European
Central Bank to cut interest rates in the future.
"We're looking for a recession now for the euro zone, which
doesn't happen that often and that really takes the ECB's
hawkish rhetoric out of the picture," said Harvinder Sian,
interest rate strategist at RBS.
U.S. government debt also rose. An big thrust into T-bills
sent one-month rates <US1MT=RR> a touch below zero percent
overnight and three-month rates <US3MT=RR> below 0.50 percent.
The benchmark 10-year U.S. Treasury note <US10YT=RR> rose
2/32 to yield 3.80 percent. The 30-year U.S. Treasury bond
<US30YT=RR> rose 7/32 to yield 4.37 percent.
The dollar rose against major currencies, with the U.S.
Dollar Index <.DXY> up 0.06 percent at 76.811.
The euro <EUR=> rose 0.04 percent at $1.4649, and against
the yen, the dollar <JPY=> fell 0.46 percent at 105.99.
Oil rose as concern about U.S. fuel supplies and signs OPEC
cut output in September outweighed doubts about the U.S.
government's plan to rescue the finance industry.
U.S. light sweet crude oil <CLc1> rose 33 cents to $106.94
a barrel, and spot gold prices <XAU=> fell slightly, by $2.70
to $888.00 an ounce.
Trading in commodities prices was volatile as investors
worried about the U.S. bailout plan.
"It's really a no-man's land -- everything's going to be in
limbo until it's clear how the U.S. Congress will react to the
Paulson rescue plan," said Gary Mead, senior commodities
analyst at Virtual Metals.
Gold initially rose in volatile trade as the SPDR Gold
Trust, the world's largest gold-backed exchange-traded fund,
scaled a record high. Jittery investors moved into commodities
due to an uncertainty over the bailout plan's future.
Spot gold prices <XAU=> fell $2.70 to $888.00.
Asian financial shares rose after Buffett's investment in
Goldman. Japan's Nikkei <> gained 0.2 percent, while
MSCI's index of Asia-Pacific stocks outside Japan
<.MIAPJ0000PUS> was up 0.15 percent at 16:45 GMT.
(Reporting by Ellis Mnyandu, Steven C. Johnson, Richard Leong,
Gertrude Chavez-Dreyfuss and Nick Olivari in New York; Jane
Merriman, Matthew Robinson and Naomi Tajitsu in London and
Blaise Robinson in Paris; Writing by Herbert Lash; Editing by
Leslie Adler)
