* Global stocks plunge as U.S. auto rescue prospect dims
* Oil falls under $50 a barrel to a three-year low
* Debt rallies after U.S. jobless data raises growth fears
* U.S. dollar, euro extend losses vs yen on risk aversion
(Adds close of European markets, freshens U.S. pricings)
By Herbert Lash
NEW YORK, Nov 20 (Reuters) - Fears of a deep global
recession ripped 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.
Hopes of a deal that would rescue ailing U.S. automakers
helped U.S. stocks claw back to break-even levels.
The bleak economic outlook triggered technical breaches by
major stock indexes around the world, an event that could
unleash even greater turmoil as sentiment darkens among
investors and threatens to send markets spiralling into a
deeper slump.
Crude oil <CLc1> slipped nearly 9 percent to a low of
$48.85 a barrel at one point.
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 of the 3,229 issues
traded on the New York Stock Exchange hit 52-week lows.
The stock of corporate icons Citigroup, General Motors and
Ford plunged anew as all three traded below $5 a share before
news of a possible legislation to help the automakers led GM
and Ford, which almost fell below $1, to sharply rebound.
Debt yields also fell to record lows. The 30-year U.S.
Treasury bond declined to lows last seen in the early 1960s,
and U.S. credit default swaps widened to levels that suggest
investors expect the worst wave of investment-grade corporate
bond defaults since at least 1980.
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 and Dow inched into positive
terrority.
Declining prices in one asset class fed declines in
another, analysts said but the biggest indicator in market
sentiment in recent weeks has been stocks.
Shortly after 2 p.m., the Dow Jones industrial average
<> was down 29.71 points, or 0.37 percent, at 7,967.57. The
Standard & Poor's 500 Index <.SPX> was down 7.76 points, or
0.96 percent, at 798.82. The Nasdaq Composite Index <> was
up 2.54 points, or 0.18 percent, at 1,388.96.
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
closed down 3.8 percent at 781.06 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 more than 11 percent,
while Kazakhmys <KAZ.L> and Rio Tinto <RIO.L> each fell about
10 percent.
Oil stocks also weakened as crude prices <CLc1> fell more
than 8 percent.
Total <TOTF.PA> and BP <BP.L> were down between 4.4 percent
and 4.9 percent.
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."
U.S. light sweet crude oil <CLc1> fell $4.92 to $48.70 a
barrel.
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 into 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 87.921. Against the yen,
the dollar <JPY=> was down 0.39 percent at 95.53.
The euro <EUR=> rose a bare 0.05 percent to $1.2528.
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> rose
42/32 in price to yield at 3.19 percent. The 2-year U.S.
Treasury note <US2YT=RR> added 5/32 in price to yield 0.9909
percent.
Spot gold prices <XAU=> rose $16.10 to $748.50 an ounce.
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 Theodore d'Afflisio)
