* Global stocks plunge as U.S. auto rescue prospect dims
* Oil falls under $50 a barrel to a 22-month low
* Debt rallies after U.S. jobless data raises growth fears
* U.S. dollar, euro extend losses vs yen on risk aversion
(Recasts with U.S. markets, adds byline; dateline previously
LONDON)
By Herbert Lash
NEW YORK, Nov 20 (Reuters) - Fear of a prolonged and deep
global recession buzz-sawed through global markets on Thursday,
sending U.S. stocks to six-year troughs, yields on government
debt to record lows and the price of oil below $50 a barrel.
The bleak economic outlook triggered technical breaches by
major stock indexes around the world, an event that could
unleash greater turmoil as bear-market sentiment deepens and
threatens to spiral markets into a treacherous slump.
Crude oil <CLc1> slipped to $49.75 a barrel, the lowest
level since May 2005.
The stampede into low-risk assets from stocks pushed
ultra-short U.S. government bill rates toward zero percent and
two-year yields to a series of record lows.
The S&P 500, the benchmark for U.S. institutional
investors, fell to its lowest level since October 2002, while
other U.S. indexes and benchmarks in Europe and Asia set fresh
5-1/2-year lows. Two out of every five issues traded on the New
York Stock Exchange plummeted to 52-week lows.
The stock of corporate icons Citigroup, General Motors and
Ford plunged anew as all three traded below $5 a share. Ford
closed in on penny-stock level as the prospect that U.S.
automakers may fail to get a government bailout unnerved
investors.
Yields on U.S. government debt also fell to record lows.
The 30-year long bond declined to lows last seen in the early
1960s, and two-year notes
Fresh economic data reinforced the market gloom. The
Conference Board's index of Leading Economic Indicators fell to
its lowest level in four years in October, factory activity in
the U.S. Mid-Atlantic region fell to an 18-year low in
November, and the number of American workers lining up for
first-time jobless benefits surged to a 16-year high last
week.
"Anxiety about the financial markets is shifting to anxiety
about fundamentals and the real economy, and that's keeping the
overall levels of risk aversion very high," said Vassili
Serebriakov, currency strategist at Wells Fargo in New York.
"We've had disappointing U.S. economic data and we believe
the bear market in equities will continue, lending more support
to the dollar and yen."
U.S. indexes pared losses before midday after an early
morning plunge, and the Nasdaq gained slightly.
Before noon, the Dow Jones industrial average <> was
down 35.29 points, or 0.44 percent, at 7,961.99. The Standard &
Poor's 500 Index <.SPX> was down 8.79 points, or 1.09 percent,
at 797.79. The Nasdaq Composite Index <> was up 3.40
points, or 0.25 percent, at 1,389.82.
The picture in Europe was no better. Commodities, a
harbinger of global economic growth, were among the biggest
losers on the index of leading European companies.
The FTSEurofirst 300 <> index of top European shares
unofficially closed down 3.7 percent at 781.9 points. The index
has shed about 48 percent so far this year.
Among mining companies, Vedanta Resources <VED.L> plunged
almost 13 percent, Xstrata <XTA.L> shed 10 percent, while
Kazakhmys <KAZ.L> and Rio Tinto <RIO.L> each fell almost 9
percent.
Oil stocks also weakened as crude prices <CLc1> slipped
down more than 5 percent.
Total <TOTF.PA>, ENI <ENI.MI> and BP <BP.L> were down
between 4.4 percent and 4.9 percent.
Declining prices in one asset class fed declines in
another, analysts said. The biggest indicator in market
sentiment in recent weeks has been stocks.
With economies weakening worldwide, Deutsche Bank said
crude oil could fall to as low as $40 a barrel next year.
"Weakness in stocks reflects weakness in the economy at the
moment looking forward, but I think the general trend in oil is
lower anyway," said Sucden's head of research Michael Davies.
"It's a bit of a chicken or egg thing. Everything's moving
together, it's hard to say what's leading."
The U.S. dollar and euro extended losses against the yen,
each falling more than 1 percent, as global recession fears
pushed risk-averse investors to the Japanese currency.
Risk aversion benefits the yen as investors pull money out
of higher-yielding assets such as stocks and commodities,
positions that were financed with a cheaply borrowed yen.
The dollar, however, gained against high-yield currencies,
and rose against a basket of major currencies; the U.S. Dollar
Index <.DXY> was up 0.14 percent at 87.923. Against the yen,
the dollar <JPY=> fell 0.91 percent at 95.03.
The euro <EUR=> fell 0.06 percent at $1.253.
Short-dated yields on euro zone government bonds hit their
lowest levels in over five years. Two-year bond yields
<EU2YT=RR> were 11.5 basis points lower at 2.056 percent,
having fallen as low as 1.989 percent.
The benchmark 10-year U.S. Treasury note <US10YT=RR> was up
34/32 in price to yield 3.22 percent. The 2-year U.S. Treasury
note <US2YT=RR> rose 4/32 in price to yield 1.01 percent.
Overnight in Asia, Japan's Nikkei average <> dropped
nearly 7 percent.
The MSCI All-Country World Index <.MIWD00000PUS> was down
3.2 percent at 196.12 -- its lowest level since May 2003.
(Reporting by Ellis Mnyandu, Richard Leong, Steven S. Johnson
in New York and Rebekah Curtis, Kirsten Donovan, Chris Baldwin
and Pratima Desai in London, writing by Herbert Lash; Editing
by Leslie Adler)
