(Adds midday prices)
By Herbert Lash
NEW YORK, March 13 (Reuters) - Gold shot past $1,000 for
the first time and the dollar tumbled to a new low on Thursday
as credit concerns rumbled through financial markets again,
pushing global stocks into the loss column in volatile
dealings.
After opening down sharply on concerns of a major hedge
fund default caused by subprime loan losses, shares in Europe
and the United States recovered from their lows.
The markets managed to rebound after Standard & Poor's
issued a report that major banks have seen the worst of the
housing finance charges. U.S. Treasury prices fell on the news
as flight-to-quality investors pulled back.
Oil rose to a fresh record high for a seventh straight
trading day as a weak dollar overshadowed an increase in U.S.
crude inventories.
The dollar plunged below 100 yen for the first time in over
a decade and hit a new low versus the euro.
After the biggest rally in five years on Tuesday investors
soured somewhat on the Federal Reserve-led credit market rescue
and focused instead on a string of investment fund failures
that suggested much more pain ahead.
"These types of injections are preventing the inevitable
default of these institutions that should be defaulting," said
Joe Saluzzi, co-manager of trading at Themis Trading in
Chatham, New Jersey.
Investors were alarmed over a default on about $16.6
billion of debt reported late Wednesday by a Dutch-listed
affiliate of U.S. buyout firm Carlyle Group. Some feared big
liquidation of assets onto the markets.
Carlyle Capital Corp <CARC.AS> said in New York that it
expects its lenders to seize remaining assets. Talks with
lenders deteriorated after the value of Carlyle Capital's
mortgage investments dropped, resulting in margin calls of
$97.5 million on top of some $400 million it already faced.
"We are in a vicious spiral of unwinding years of
increasing leverage in the space of a few weeks," said Andrea
Cicione, a credit strategist at BNP Paribas, one of Carlyle
Capital's lenders. No one can say how much leverage must be
wrung out before the unwinding comes to an end, Cicione said.
The credit crunch, triggered last year when subprime
mortgages made to risky U.S. borrowers went sour, has put
increasing pressure on lenders to shore up capital.
It has also made it difficult to value all types of
collateralized debt and exotic fixed-income instruments that
are at the heart of the credit crisis, including investments
held by Carlyle Capital.
Carlyle Capital's shares tumbled 87.5 percent to 35 cents,
a fraction of their $20 debut price last July.
The Dow Jones industrial average <> slid 72.13 points,
or 0.60 percent, to 12,038.11 but erased some of its bigger
earlier loss of more than 200 points. The Standard & Poor's 500
Index <.SPX> slipped 7.16 points, or 0.55 percent, to 1,301.61.
The Nasdaq Composite Index <> dropped 10.74 points, or
0.48 percent, to 2,233.13.
In Europe, the FTSEurofirst 300 <> closed
unofficially down 1.2 percent at 1,269.74 points, taking losses
for the year to 15.7 percent.
Banks trimmed intraday losses in excess of 4.5 percent
after the S&P report on bank write-downs.
Japan's Nikkei benchmark <> sank to a new 2-1/2 year
closing low, down 3.3 percent at 12,433.44. The broader TOPIX
<> was down 3.1 percent at 1,215.87, also a 2-1/2 year
low.
Overnight the dollar fell to 99.77 yen, its lowest level
since 1995.
The dollar also hit a record low against a basket of major
currencies <.DXY> as oil and gold hit all-time highs, while
U.S. retail sales data added economic concerns.
Fund managers and gold experts said they expect bullion
could rise to further records as more and more investors turned
to gold as an alternative investment, even though the metal
could retreat due to profit taking in the short run.
The active gold contract for April delivery <GCJ8> in New
York hit a record high of $1,001.
The sinking dollar took most of the focus as it reflected
both current U.S. economic weakness and an unwinding of risky
trades involving yen borrowing.
"We are entering dollar crisis mode," said Derek Halpenny,
currency economist at BTM-UFJ in London.
"Looking at the markets there is a complete loss of
confidence and that's because the markets are concerned over
the U.S. financial sector and ultimately what the (Federal
Reserve) will be forced to do to support that sector," he
said.
The recent currency moves have aroused concern from
European Central Bank President Jean-Claude Trichet and
Japanese Finance Minister Fukushiro Nukaga.
Trichet, in an interview with French magazine Le Point,
said disorderly swings in currencies were undesirable.
"In the present circumstances, I am concerned by excessive
exchange rate movements," he told Le Point.
Nukaga said dollar/yen exchange rate moves were a
reflection of dollar weakness rather than yen strength.
The tumbling dollar poses a dilemma for the ECB, which is
holding off cutting interest rates because of concern about
inflation pressures.
Oil rose again. U.S. crude for April delivery <CLc1> struck
a new high of $111.00 a barrel.
London Brent crude for April <LCOc1>, which expires on
Friday, also hit a new peak at $107.88.
(Reporting by Herbert Lash. Editing by Richard Satran)
