(Recasts; adds oil prices details, prices throughout)
By Herbert Lash
NEW YORK, March 4 (Reuters) - Fears surrounding global
banks depressed stocks worldwide on Tuesday and recession
worries triggered profit-taking among economically sensitive
commodities which have rallied to all-time highs in recent
days.
Oil prices tumbled more than 3 percent to below $100 a
barrel as OPEC prepared to meet on Wednesday. The drop in
crude futures dragged gold along with it just as the precious
metal approached a record near $1,000 an ounce. Its 2 percent
fall reversed hefty gains initially.
The financial markets recovered from their worst levels
late in the New York session on talk that bond insurer Ambac
Financial Group Inc <ABK.N> may be nearer a restructuring that
could help the troubled company continue as a going concern.
The dollar also turned higher against the yen late in the
day as U.S. stocks trimmed losses on talk of the Ambac plan,
one of the few potential beacons of light in a bleak banking
scenario. Ambac plays a key role in facilitating bond trading
liquidity.
Bonds also shifted course, turning swiftly lower from
initial gains as stocks pared losses, curbing safe-haven bids
for Treasuries.
The benchmark 10-year note's <US10YT=RR> price -- which
moves inversely to its yield -- fell 19/32 for a yield of 3.62
percent, compared with 3.55 percent late on Monday.
Earlier, the dollar had fallen versus the yen and Swiss
franc after Federal Reserve Chairman Ben Bernanke warned that
U.S. mortgage delinquencies and foreclosures are likely to
continue hitting banks as home prices decline further.
"Investors are concerned about the width and depth of the
problems in subprime and real estate. It has not gone away, and
every couple of days, it rears its ugly head," said Paul Nolte,
director of investments at financial adviser Hinsdale
Associates in Hinsdale, Illinois.
Banking and credit woes were highlighted by concerns that
Citigroup Inc, the largest U.S. banking company, could need $15
billion more capital after already raising double that amount
of from investors including Abu Dhabi, Kuwait and Saudi Prince
Alwaleed bin Talal. A Merrill Lynch analyst made the projection
based on further mortgage write-downs.
"It's going to take more than that (amount already raised)
to rescue Citi," said Sameer al-Ansari, head of investment
agency Dubai International Capital, at a private equity
conference in Dubai.
The Dow Jones industrial average .DJI> ended down 45.10
points, or 0.37 percent, at 12,213.80 in volatile trading.
The broad-based Standard & Poor's 500 Index .SPX> toyed
with falling to a 17-month low during the session, but closed
slightly above a low set Jan. 22, up 4.60 points at 1,326.74.
The S&P is still off about 15 percent from a peak set in
October, and about 10 percent so far this year.
Citigroup, the largest U.S. bank, closed down 4.3 percent
at $22.10.
European shares fell for a fifth consecutive day as concern
over banks' future earnings also weighed on financials and a
weaker outlook from U.S. chipmaker Intel sent technology stocks
lower.
The pan-European FTSEurofirst 300 index .FTEU3> closed 1.4
percent lower, a six-week closing low.
Banking stocks were the weakest sector and the heaviest
weight on the European benchmark index with HSBC falling 2.7
percent, UBS down 3.4 percent and UniCredit down 2.4 percent.
Technology stocks fell after Intel said weaker prices for
some of its memory chips could hurt profits, adding to worries
about technology sector spending and growth. But optimistic
words on the economy from Cisco's chief John Chambers late in
the day sharply cut the losses.
In speaking to a group of community bankers. Bernanke
urged a vigorous response to stabilize housing markets and said
banks may have to write down the principal of some troubled
home loans to ward off greater losses that could result from
outright defaults.
His outlook for more painful writedowns, together with
expectations of more Fed rate cuts, triggered buying in
treasuries initially.
Verbal intervention by euro finance ministers ahead of the
European Central Bank meeting on Thursday halted the euro's
five-day run of record highs versus the dollar.
In late afternoon in New York, the dollar was 0.2 percent
higher at 103.44 yen <JPY=>, after it touched a session low of
102.66, near a three-year trough reached on Monday.
The euro was flat at $1.5205 <EUR=>, off the $1.5275
all-time high set on Monday, according to Reuters data. The
dollar index <.DXY>, which tracks the value of the greenback
against a basket of currencies, slid 0.1 percent to 73.689.
The euro was also little changed at 157.03 yen <EURJPY=> but
dropped 0.4 percent to 1.5783 Swiss francs <EURCHF=>. Against
the Swiss currency, the dollar declined 0.4 percent to 1.0381
Swiss francs <CHF=>.
U.S. light crude for April delivery <CLc1> settled $2.93
lower, or 2.9 percent, at $99.52 a barrel, off an all-time high
of $103.95 set Monday on expectations the Organization of
Petroleum Exporting Countries would hold output steady at its
meeting in Vienna.
London Brent crude <LCOc1> settled $2.96 lower at $97.52.
(Writing by Herbert Lash; editing by Richard Satran, Gary
Crosse)
