* U.S. stocks slip as economic worries offset early bounce
* Oil rebounds off 16-month low; analysts expect OPEC cut
* Stock slide revives safe-haven bid for government debt
* Euro at two-year low vs dollar as safety drives buying
(Recasts with U.S. markets, adds byline; changes dateline;
previous LONDON)
By Herbert Lash
NEW YORK, Oct 23 (Reuters) - Oil prices rose on Thursday
ahead of an OPEC meeting while U.S. stocks failed to hold a
brief rally after a dismal holiday sales outlook from Amazon
and rising jobless claims pointed to a darkening economy.
A thick cloud of risk aversion hanging over financial
markets had scattered earlier with investors diving into
beaten-down energy shares, lifting U.S. equity markets and
turning currency and government debt markets around.
The U.S. stock bounce helped pulled European shares off 3.2
percent lows to close slightly lower but the gains soon lost
steam, pulled down by the bleak economic outlook.
"The market overall remains very radically oversold but it
has been for weeks now," said Chip Hanlon, president of Delta
Global Advisors Inc in Huntington Beach, California.
"One would think one of these rallies would take hold and
move substantially higher, but after a few false starts it
becomes harder to have conviction that this is the one."
U.S. workers lined up for jobless benefits in unexpectedly
large numbers last week as the trauma in financial markets
continued to hammer the economy, fresh U.S. government data
showed.
Adding to the gloom companies announced deeper job cuts to
stop the financial bleeding caused by the credit crisis.
Amazon.com Inc <AMZN.O> said end-of-year holiday sales
would fall short of Wall Street's expectations, driving its
shares 6.7 percent lower and pulling down the Nasdaq.
"We're looking at the economy contracting in the fourth
quarter very sharply, certainly contracting in the first
quarter, maybe contracting in the second quarter as well," said
Nigel Gault, chief U.S. economist at Global Insight in
Lexington, Massachusetts.
"Going through that whole period with GDP actually
declining, all the time that's happening, you're going to see
heavy job losses," Gault said.
After 1 p.m., the Dow Jones industrial average <> was
down 80.76 points, or 0.95 percent, at 8,438.45. The Standard &
Poor's 500 Index <.SPX> was down 15.10 points, or 1.68 percent,
at 881.68. The Nasdaq Composite Index <> was down 45.68
points, or 2.83 percent, at 1,570.07.
Declining shares outnumbered advancing shares by almost 3
to 1 on the New York Stock Exchange, and almost by 4 to 1 on
Nasdaq.
Energy shares led an upward charge on both sides of the
Atlantic, lifted by rising oil prices a day before an emergency
meeting of the Organization of Petroleum Exporting Countries.
Many OPEC members have called for supply cuts.
Oil giants were the major gainers in Europe, with BP <BP.L>
and Royal Dutch Shell <RDSb.L> both rising more than 5 percent.
In the United States, Exxon Mobil <XOM.N> and Chevron <CVX.N>
rose 6.7 percent and 7.3 percent, respectively.
Although not as violent as other recent sessions, U.S.
indexes swung between positive and negative territory a day
after stocks closed at five-year lows.
The FTSEurofirst 300 <> index of top European shares
ended 0.1 percent lower at 872.72 points as losses in banks and
automobiles eclipsed the gains in oil and defensive shares.
Mercedes-Benz maker Daimler <DAIGn.DE> fell 1.3 percent as
it lowered its full-year revenue and profit forecast after
third-quarter operating profit plunged by two-thirds.
"The market did not like Daimler results," said Philip
Lawlor, a strategist at Nomura.
"Daimler is very exposed to the high-end market which is
falling off a cliff in the U.S. It is a reiteration of just how
grim the economic backdrop is a the moment," he said.
Oil rose more than $2 a barrel. The bounce in crude prices
may have gained some momentum on buying to cover positions that
had bet oil prices would continue their slide, traders said.
"We may well be experiencing some short covering in front
of tomorrow's meeting in Vienna," said Robert Laughlin of MF
Global in London.
U.S. light sweet crude oil <CLc1> rose $1.13 to $67.88 a
barrel.
Spot gold prices <XAU=> fell $11.25 to $716.40 an ounce.
The euro rebounded versus the dollar after the U.S.
currency touched a two-year high as gains in the stock market
prompted some profit-taking against the greenback.
But the euro later fell against the dollar and analysts
said currencies remained vulnerable to erratic moves.
"Investors are still very panicky and very much in a
trigger-happy mood. The market is still dominated by risk
aversion flows and and we are pretty much trading off what
equities are doing," said Boris Schlossberg, director of
foreign exchange research at GFT Forex in New York.
"The reason we have such volatility is because visibility
is completely clouded. Almost all asset classes are being
priced for a very serious, almost depression-like scenario and
the market is waiting to see if this is going to happen."
The dollar rose against a basket of major currencies, with
the U.S. Dollar Index <.DXY> up 0.21 percent at 85.617. Against
the yen, the dollar <JPY=> fell 0.77 percent at 97.11.
The euro <EUR=> fell 0.26 percent at $1.2819.
U.S. government debt prices also rode up and down, while
euro zone government bond futures erased gains in late trade
when U.S. stocks briefly recovered.
The benchmark 10-year U.S. Treasury note <US10YT=RR> rose
11/32 in price to yield 3.56 percent, while the 2-year U.S.
Treasury note <US2YT=RR> slipped 2/32 in price to yield at 1.53
percent.
In Asia, Japan's Nikkei average <> closed down 2.5
percent after earlier hitting its lowest point since May 2003
(Reporting by John Perry, Lucia Mutikani and Gertrude
Chavez-Dreyfuss in New York and Joanne Frearson, Ikuko Kao in
London; Writing by Herbert Lash; Editing by Leslie Adler)
