* Oil falls under $50 a barrel to three-year low
* Debt rallies after U.S. jobless data raises growth fears
* 10-year Treasury note yield at five-decade low
* U.S. dollar, euro extend losses vs yen on risk aversion
(Adds close of U.S. markets)
By Herbert Lash
NEW YORK, Nov 20 (Reuters) - Fear of a deep global slowdown
ripped through financial markets on Thursday, wiping out a
decade of U.S. stock market gains and driving yields on
government debt to record lows as aversion to risk exploded.
A bearish U.S. jobs report intensified concerns of a long
recession and crushed expectations for energy demand, sending
crude oil down more than 7 percent to below $50 a barrel.
The bleak economic outlook triggered technical breaches by
major stock indexes around the world, which could unleash even
greater turmoil as sentiment among investors darkens and
threatens to spiral markets into a deeper worldwide slump.
"You have fear in the market that you haven't had since the
1930s," said Bryan Taylor, chief economist with Global
Financial Data in Los Angeles.
Investors stampeded into low-risk assets as they abandoned
stocks for U.S. government debt and the risk-averse yen.
Ultra-short bill rates fell toward zero percent and two-year
yields set a series of record lows.
The S&P 500, the benchmark for U.S. institutional
investors, fell to its lowest closing level since April 1997,
while other U.S. indexes and benchmarks in Europe and Asia set
5-1/2-year lows. Almost one out of every two of the 3,249
issues traded on the New York Stock Exchange hit 52-week lows.
The Wilshire 5000 index, the broadest measure of U.S. stock
markets, has now fallen by more than 50 percent since its peak
on Oct. 9, 2007. The fall is more than when the dot-com bubble
burst from March 2000 to October 2002, the start of a five-year
rally.
Shares of corporate icons Citigroup, General Motors and
Ford plunged anew as all three traded below $5 a share, before
news of possible legislation to help the automakers led GM and
Ford, which almost fell below $1, to rebound sharply.
Democratic Congressional leaders later indicated they may
not go along with the terms of a proposed bailout.
Ford <F.N> climbed 10.3 percent, GM <GM.N> rose 3.2 percent
and Citigroup <C.N> shed 26.4 percent to close at $4.71.
Debt yields also fell to record lows. The 30-year U.S.
Treasury bond declined to lows last seen in the early 1960s,
and the U.S. 10-year Treasury note fell to its lowest in five
decades.
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 reading 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."
The Dow Jones industrial average <> closed down 444.99
points, or 5.56 percent, at 7,552.29. The Standard & Poor's 500
Index <.SPX> fell 54.14 points, or 6.71 percent, at 752.44. The
Nasdaq Composite Index <> shed 70.30 points, or 5.07
percent, at 1,316.12.
Declining shares beat advancing stocks by 13 to 1.
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.
"Emerging markets are falling apart, nobody knows when the
currency bleeding is going to stop. There is hardly any ray of
hope on the horizon," said Franz Wenzel, strategist at AXA
Investment Managers in Paris.
Among European 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
lost about 10 percent.
Oil stocks also weakened as crude prices <CLc1> plunged.
Total <TOTF.PA> and BP <BP.L> fell 4.4 percent and 4.9
percent, respectively.
With economies weakening worldwide, Deutsche Bank said
crude oil could fall to as low as $40 a barrel next year.
"Further weakness can be expected for crude oil if global
markets continue to march on their deep spiral south," said
Chris Jarvis, senior analyst for Caprock Risk Management in
Hampton Falls, New Hampshire.
U.S. crude <CLc1> fell $4 to settle at $49.62 a barrel
while London Brent crude <LCOc1> shed $3.64 to settle at $48.08
a barrel. Both posted their lowest closes since May 2005.
The benchmark 10-year U.S. Treasury note <US10YT=RR> jumped
almost 3 points in price to yield 3.00 percent. The 2-year U.S.
Treasury note <US2YT=RR> rose 5/32 in price to yield 0.98
percent.
The dollar rose against a basket of major currencies, with
the U.S. Dollar Index <.DXY> up 0.49 percent at 88.233. Against
the yen, the dollar <JPY=> fell 1.93 percent at 94.05.
The euro <EUR=> slipped 0.53 percent at $1.2456.
"The price action in the stock market just reinforces the
fact that there's a lot of negativity out there," said Joe
Francomano, vice president of foreign exchange at Erste Bank in
New York. "So you're seeing the risk aversion trades -- dollar
and yen -- perform well."
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.
U.S. gold futures ended nearly 2 percent higher on physical
gold bullion buying in spite of a broad decline in commodities,
a strong dollar and further losses in equity markets.
The December contract for gold <GCZ8> settled up $12.70 to
$748.70 an ounce in New York.
Overnight in Asia, Japan's Nikkei average <> dropped
nearly 7 percent.
The MSCI All-Country World Index <.MIWD00000PUS> was down
6.08 percent at 190.34.
(Reporting by Leah Schnurr, Richard Leong, John Parry, Steven
S. Johnson, Frank Tang and Edward McAllister in New York and
Rebekah Curtis and Pratima Desai in London; writing by Herbert
Lash; Editing by Leslie Adler)
