GLOBAL MARKETS-Yen near record high, stocks weak but off lows

                                
  
  * Yen hits 16-year high against dollar
  * U.S. shares weak but off lows on Japan nuclear crisis
  * Nasdaq turns negative for '11
  * U.S. Treasury bonds rally as investors flee risky assets
 (Updates with yen at 16-year high, U.S. prices)
                                
 By Daniel Bases and Al Yoon
                                
 NEW YORK, March 16 (Reuters) - U.S. stocks pulled back from
their worst levels on Wednesday to mostly hold marginal gains
for 2011 while Japan's nuclear crisis spurred yen buying in
anticipation that insurance payouts on a disaster that
threatens to slow global economic growth.
                                
 All three major indexes are up from losses of more than 2
percent, although the Nasdaq stock market is still slightly
lower for the year.
                                
 Volatility in the market has surged on speculation that
damage to nuclear reactors in Japan remains uncontained.
                                
 The yen, at one point traded under 80 per U.S. dollar to
79.972 yen <JPY=EBS> on the EBS platform -- within striking
distance of an all-time low of 79.75 yen set on April 19, 1995.
Speculation that Japanese insurers will have to repatriate yen
home to pay for claims was viewed as the main reason for the
move.
                                
 The chairman of the U.S. Nuclear Regulatory Commission on
Wednesday told Congress that the agency  would recommend an
evacuation area larger than that already in place, also noting
that radiation levels are "extremely high."
                                
 U.S. Treasury bonds were well bid by investors seeking
safety for a third straight day, driving prices up nearly a
full points or more and pushing yields down to fresh
three-month lows.
                                
 Crude oil prices rose steadily on the escalating violence
in the Middle East, giving investors another reason to sell
riskier equities.
                                
 "We are so fixated here on Japan, and this intraday
volatility is without question here to stay as we are all
quickly learning what nuclear power is. You can throw
everything else out the window," said Ryan Detrick, senior
technical strategist at Schaeffer's Investment Research in
Cincinnati, Ohio.
                                
 In late New York trade, the Dow Jones industrial average
<.DJI> fell 222.32 points, or 1.81 percent, to 11,633.19. The
Standard & Poor's 500 Index <.SPX> dropped 22.16 points, or
1.73 percent, to 1,259.71. The Nasdaq Composite Index <.IXIC>
lost 41.07 points, or 1.54 percent, to 2,626.26.
                                
 "Based on the events now, it isn't impossible that the VIX
could get up to where it was at the height of the (financial)
crisis. It could triple," said Phil Flynn, senior market
analyst with PFG Best in Chicago.
                                
 The CBOE Volatility Index or VIX, the main index of
volatility <.VIX>, rose 18.83 percent to 28.90, its highest
level since mid-2010. Earlier, the VIX reached an an intraday
high at 31.28 -- up nearly 30 percent from Tuesday's close.
                                
 U.S. and European markets also weakened after the U.S.
government said its Producer Price Index surged at its fastest
pace in more than 1-1/2 years in February.
                                
 MSCI's all-country world stock index <.MIWD00000PUS> was
down 0.67 percent. Over the past three sessions, the index fell
as much as 4.5 percent, following a near 20 percent,
two-session dive in Japan's Nikkei average <.N225>.
                                
 A 5.7 percent rise in the Nikkei drove the recovery in
Asia, though it remained down more than 11 percent for the
year.
                                
 Europe's Eurofirst 300 <.FTEU3> dropped 1.6 percent,
extending losses to a sixth straight day. Banks led decliners
after the Moody's downgrade of Portuguese debt.
[ID:nLDE72F1VG]
                                
 TREASURIES, OIL, GOLD HIGHER
                                
 Benchmark U.S. 10-year Treasury yields declined to 3.21
percent, after earlier hitting a three-month low of 3.14
percent.
                                
 Investors pushed the 10-year Treasury note's price up 28/32
of a point.
                                
 Gold prices rebounded after two days of decline. Some focus
in the precious metals market shifted back to loose monetary
policies and geopolitical tensions, moving away from the
nuclear crisis.
                                
 Bullion was underpinned by a European Central Bank
policymaker's comment that suggested the ECB could possibly
delay an April interest-rate hike, and after the downgrade of
Portugal by Moody's.
                                
 "Now that the dust has settled a little bit and we've had
particularly a recovery in energy and other commodities, that's
given a tailwind to gold," HSBC analyst James Steel said. "If
the focus ceases to be entirely on Japan, and the Middle East
again gets some headlines, then the geopolitical risk levels
will come back in and support gold."
                                
 Spot gold <XAU=> gained 0.15 percent, or $2.10, to $1,396
an ounce
                                
 Brent crude for May rose $2.01 to settle at $110.60 a
barrel.
 (Reporting by Daniel Bases and Al Yoon; Editing by Jan
Paschal)