* European, U.S. shares fall, Japan stocks bounce back
* Yen nearing record high against dollar
* Bahrain, Libya concern boosts oil price
* U.S. Treasuries rally as investors flee risky assets
(Updates U.S. prices)
By Al Yoon
NEW YORK, March 16 (Reuters) - European and U.S. shares
slid for a third day on Wednesday, while Treasury debt prices
jumped as the nuclear crisis in Japan raised concerns about
slower worldwide growth.
Investors also kept an eye on tensions in Bahrain as well
as on euro-zone borrowing costs, especially in Portugal.
On Wall Street, the major U.S. stock indexes fell 1
percent after comments from the European Union's energy chief
about the potential risk of another catastrophe at Japan's
nuclear site. By midday, though, the indexes had slightly
trimmed those losses.
U.S. stocks opened lower as the price of Brent crude oil
<LCOc1> rose to an intraday high above $111 a barrel after
Bahraini security forces cracked down on protesters, with
fighting in Libya simmering in the background.
"There is a perfect storm of uncertainty right now in
terms of global growth, and markets are taking that into
account," said Oliver Pursche, president of Gary Goldberg
Financial Services in Suffern, New York.
Euro-zone debt worries also surfaced, pressuring the euro.
Portugal's 12-month borrowing costs rose at a bill auction
after a two-notch rating downgrade by Moody's, showing the
debt-laden country remains under pressure despite a euro-zone
deal to tackle the debt crisis.
Some sectors of financial markets began to readjust after
a worldwide battering of riskier assets following the
earthquake, tsunami and nuclear disasters that have hit Japan,
the world's third-largest economy. But fresh reports of
instability at a Japan nuclear plant deepened investor fears.
MSCI's all-country world stock index <.MIWD00000PUS> was
down 0.25 percent. Over the past three sessions, the world
stock index fell as much as 4.5 percent on the back of a near
20 percent, two-session dive in Japan's Nikkei average
<>.
Wednesday's recovery was mainly boosted by Asia stocks,
with the Nikkei regaining 5.7 percent. But the Nikkei remained
down more than 11 percent for the year.
There was widespread belief that the post-earthquake
sell-off had gone too far, too quickly, but there was still
concern that the nuclear reactor crisis was unresolved.
"Uncertainty in the Fukushima nuclear power plant is
clearly making market participants very nervous," said
Kazuhiro Takahashi, general manager at Daiwa Securities
Capital Markets in Tokyo.
Investors were further rattled by European Union Energy
Commissioner Guenther Oettinger, who told the European
Parliament: "In the coming hours, there could be further
catastrophic events, which could pose a threat to the lives of
people on the island."
But the EU energy chief's spokeswoman said he had no
specific or privileged information on Japan's nuclear reactor
situation.
The Dow Jones industrial average <> was down 143.50
points, or 1.21 percent, at 11,711.92. The Standard & Poor's
500 Index <.SPX> was down 14.82 points, or 1.16 percent, at
1,267.05. The Nasdaq Composite Index <> was down 33.08
points, or 1.24 percent, at 2,634.32.
Europe's Eurofirst 300 <> dropped 0.9 percent. Banks
led decliners after the Moody's downgrade of Portuguese debt
overnight.
U.S. and European markets also weakened after the U.S.
government reported its producer price index surged at its
fastest pace in more than 1-1/2 years in February.
Benchmark U.S. 10-year Treasury note's yield declined 0.07
percentage point to 3.22 percent. It earlier hit a more than
three-month low of 3.14 percent.
The 10-year U.S. Treasury note's price shot up 25/32.
YEN SLIPS
The yen steadied pushed to four-month high versus the
dollar as investors speculated insurers would repatriate the
currency to pay for claims.
Japan's nuclear crisis was also seen as triggering more
safe-haven yen demand, raising the prospect of intervention to
stem big gains.
The dollar <JPY=> traded lower by 0.3 percent to a new
four-month low of 80.34.
"We wouldn't talk about a recovery in dollar/yen yet,"
said Lutz Karpowitz, FX strategist at Commerzbank in
Frankfurt. A drop under 80 yen isn't expected, however, as
authorities are likely to take steps to prevent a steeper yen
rise, he added.
The dollar index <.DXY> against major currencies rose 0.4
percent, while the euro <EUR=> slipped 0.51 percent to
$1.3924, having failed to break above a four-month high of
$1.4036 hit earlier this month.
Portuguese bonds underperformed following the ratings cut
and yields rose at the sale of 1-year paper.
Spot gold prices <XAU=> rose $8.14, or 0.58 percent, to
$1402.00.
(Additional reporting by Akiko Takeda, Antoni Slodkowski,
Naomi Tajitsu, Kirsten Donovan, Atul Prakash and Harro ten
Wolde; Editing by Jan Paschal)
