* Lehman leads Wall Street to worst day since Sept. 2001
* Government debt prices soar on flight-to-safety bid
* Oil prices dip to $95 a barrel as investors flee risk
* Yen rises in broad flight from risk aversion
(Adds U.S. market close)
By Herbert Lash
NEW YORK, Sept 15 (Reuters) - Global stocks tumbled, with
Wall Street marking its worst day since markets reopened after
the attacks of Sept. 11, 2001, and crude oil prices plunged on
Monday as Lehman Brothers' bankruptcy filing caused investors
to bail out of risky assets.
Investors piled into traditional safe-havens, sending the
U.S. 30-year Treasury bond yield to its lowest level in 45
years.
The Dow industrials slumped more than 500 points to post
their biggest one-day percentage loss since July 2002, while
the S&P posted its worst one-day percentage loss since
September 2001.
Stocks in Europe, Asia and South America also plunged on
the Lehman news and as Bank of America's <BAC.N> weekend
agreement to buy Merrill Lynch <MER.N> stirred concerns about
mounting global economic problems.
The dollar slumped on the wide aversion to risk, posting
its biggest one-day drop against the yen in nine years.
European shares slid to their lowest close in two months.
Most major Asian markets were closed for a holiday, but stocks
fell heavily on open markets.
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 the view that
energy demand would slow further, dragging down oil prices.
New York crude prices fell by $5.47 to settle at $95.71,
after earlier hitting a seven-month low of $94.13 a barrel.
The Dow Jones industrial average <> closed down 504.48
points, or 4.42 percent, at 10,917.51. The Standard & Poor's
500 Index <.SPX> lost 58.06 points, or 4.64 percent, at
1,193.64. The Nasdaq Composite Index <> shed 81.36 points,
or 3.60 percent, at 2,179.91.
"The turmoil continues," said Robert Francello, head of
equity trading for Apex Capital hedge fund in San Francisco.
"And it seems to be people underestimated the impact of AIG and
what the fallout of that could be."
Shares of Lehman <LEH.N> plunged almost 95 percent in
composite trade. American International Group <AIG.N> plummeted
about 50 percent as investors grew increasingly wary after the
insurer, once the world's most valuable insurer by market
value, failed to deliver a rescue plan.
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 closed at $4.76 after falling as low as $3.50
during the session.
The Standard & Poor's 500 Index <.SPX> broke through the
psychological barrier of 1,200 set on July 15 when markets were
gripped by a previous bout of fear.
Institutional investors are waiting to see what happens to
AIG if the Federal Reserve cuts interest rates at its
policy-setting meeting on Tuesday and if a European bank is hit
by the resurgent credit crisis, traders said.
"There's a lot of cash on the sidelines and they're waiting
to put it into use but there's no impetus for them to do it,"
said Edward Craig, head of U.S. cash equities trading at
Jefferies & Co in New York.
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 dollar had managed to hold gains
against the euro for most of the New York session but as U.S.
benchmark indexes fell more than 3 percent in late New York
trading, the U.S. currency fell in its wake.
The dollar fell 2.8 percent to 104.92 yen in late New York
trading, the biggest one-day drop against the yen since August,
1999, according to Reuters data.
The euro <EUR=> rose 0.6 percent to $1.4308, though it
remained off the session high of $1.4479.
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=>.
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 price of benchmark 10-year U.S. Treasury notes jumped 2
points, a rare gain for longer-dated debt. The yield on the
30-year Treasury bond fell below 4.10 percent for the first
time since 1963.
"People are really scared. They don't trust many companies.
They don't know how safe their money is," said Charles Zhang,
managing partner at Zhang Financial in Portage, Michigan.
The price on two-year Treasury notes <US2YT=RR>, most
sensitive to the market's Fed policy outlook, was up 26/32 at
101-3/32. The yield fell to 1.80 percent, down 42 basis points
from Friday. The single-day drop in two-year yields was the
biggest since the market session right after the Sept 11, 2001,
attacks.
Gold futures ended 2.9 percent higher in volatile trade.
Gold contracts <GCZ8> for December settled up $22.50 at $787.00
an ounce in New York.
(Additional reporting by Ellis Mnyandu, Steven C. Johnson,
Richard Leong and Frank Tang in New York, Matthew Robinson,
David Sheppard, Jan Harvey in London Peter Starck in Frankfurt;
Editing by Leslie Adler)
