* Major US stock indexes tumble around 2 pct at open
* Dollar hits 15-yr low vs yen; gains vs other currencies
* Oil down 1.2 pct; government bonds firmer
By Natsuko Waki and Walter Brandimarte
NEW YORK/LONDON, Aug 11 (Reuters) - Global stocks plunged
while U.S. government debt yields fell to record lows on
Wednesday as disappointing Chinese economic data added to a
gloomy outlook voiced on Tuesday by the U.S. Federal Reserve.
The dollar, viewed as a safe-haven currency, gained against
a basket of major currencies as investors pared their exposure
to risky assets. However, it fell to a 15-year low against the
Japanese yen as U.S. Treasury debt spreads over those of
Japanese debt narrowed.
Oil prices declined some 1.5 percent on concerns about the
global economic recovery, while gold prices were up.
The Fed announced on Tuesday it would use cash from
maturing mortgage bonds it holds to buy more government debt,
maintaining the current level of monetary stimulus. For
details, see [].
Some investors interpreted the measure as a signal that
policy-makers want to support financial markets while the
economy goes through a possible pause in growth, but some said
that strategy seemed to have backfired. []
Investors decided the U.S. central bank's action was
unlikely to have much immediate impact on the labor market and
consumer spending, although the move reinforced expectations
the Fed would keep interest rates low for longer.
"If one of the Fed's goals in yesterday's statement was to
instill confidence in the market that they will do anything to
make things better, they accomplished the exact opposite in
that today we are even more worried about economic growth,"
Peter Boockvar, equity strategist at Miller Tabak & Co in New
York, said in a note to clients.
Adding to investors' woes was data showing a slowdown in
Chinese investment and factory output growth, coupled with a
Bank of England downgrade of its growth forecast and a dovish
tone from its governor Mervyn King.
The MSCI All-Country World index <.MIWD00000PUS> fell 2.1
percent while the FTSEurofirst 300 index <> of top
European shares dropped 1.8 percent.
In the United States, the three major stock indexes each
sank about 2 percent.
The Dow Jones industrial average <> lost 198.13 points,
or 1.86 percent, at 10,446.12, while The Standard & Poor's 500
Index <.SPX> fell 24.14 points, or 2.15 percent, at 1,096.92.
The Nasdaq Composite Index <> was down 54.67 points, or
2.40 percent, at 2,222.50.
Yields on U.S. Treasuries fell, with the two-year note
yield <US2YT=RR> touching a record low of 0.493 percent earlier
in the session.
The benchmark 10-year note <US10YT=RR> traded up 20/32 in
price to yield 2.699 percent, after touching a 16-month low of
2.717 percent in overseas trading.
"The fall in U.S. yields is a barometer of the cyclical
position of the U.S. economy," said Adam Cole, head of currency
strategy at RBC Capital Markets.
"The market's reaction is that if the U.S. economy is
slowing materially it will not be in isolation and it has
therefore responded by selling risk."
YEN SHINES
The dollar gained against a basket of major currencies as
investors became more averse to risk, with the U.S. Dollar
Index <.DXY> up 1.53 percent. The euro <EUR=> was down 1.84
percent at $1.2935.
Against the Japanese yen <JPY=>, however, the greenback was
down 0.53 percent at 84.95.
The dollar had earlier dropped to 84.72 yen <JPY=> on the
electronic trading platform EBS. The record low in dollar/yen
was hit in April 1995 around 79.75 yen.
Japanese Finance Minister Yoshihiko Noda said on Wednesday
that he was closely watching forex markets, but analysts
doubted his rhetoric would escalate into currency intervention
to weaken the yen. []
U.S. crude oil <CLc1> fell 1.2 percent to $79.33 a barrel
as a rise in U.S. crude imports and lower refinery operating
rates raised concerns of a stock build in the world's largest
energy consumer.
(Additional reporting by Richard Leong, Angela Moon and
Wanfeng Zhou, Editing by Chizu Nomiyama)
