(Due to a U.S. holiday, this is the last Global Markets wrapup
of the day. The normal service resumes on Tuesday)
By Natsuko Waki
LONDON, Sept 1 (Reuters) - Financial markets began the month
in a volatile mood on Monday as gloom about Britain's economic
downturn knocked sterling to a 12-year low and oil tumbled 4
percent on the day as Hurricane Gustav lost some of its power.
European stocks led a broad decline in world stocks after
investors gave the thumbs-down to Commerzbank's <CBKG.DE> $14.5
billion purchase of Dresdner Bank from Allianz <ALVG.DE>.
The yen briefly trimmed the day's gains against majors after
Japanese Prime Minister Yasuo Fukuda resigned, becoming the
second Japanese leader to resign abruptly in less than a year.
Sterling, already under pressure in recent weeks, fell anew
after weekend newspaper comments by British finance minister
Alistair Darling added to gloom about the UK economy. Darling
said the economic challenges facing the world could be the worst
for 60 years.
Mortgage and manufacturing data did little to dispel the
notion the economy was heading for recession and speculation the
Bank of England might cut interest rates before the year end.
"The economic data is just coming in awful and you aren't
getting the sense of things bottoming out like you might in the
U.S.," said Michael Hart, head of European FX strategy in
Citigroup.
Sterling slipped below $1.80 <GBP=> for the first time since
April 2006, having traded above $2 only in July this year. The
pound fell to a record low of 81.40 per euro <EURGBP=> while on
the trade-weighted index <=GBP>, it hit its lowest in 12 years.
The dollar hit its highest level for the year against a
basket of currencies <.DXY>, thanks to weakness in European
currencies and tumbling oil prices.
OIL SLIDES
Crude oil prices <CLc1> fell 4 percent to a four-month low
of $110.63 a barrel after Gustav weakened to a Category 2
hurricane, easing fears of major damage to oil facilities in the
Gulf of Mexico.
Gustav was expected to move ashore to the west, sparing New
Orleans its full force.
The storm, however, is the biggest threat to the region --
home to a quarter of U.S. oil output and 15 percent of natural
gas output -- since Hurricanes Katrina and Rita wrecked more
than 100 offshore oil platforms in 2005 and closed several large
refineries for months.
Nearly 2 million people have fled the U.S. coastal areas.
NEW MONTH, OLD PROBLEMS
General gloom about the economic outlook -- with Japan and
the euro zone already half way into recession -- weighed on
stocks.
The FTSEurofirst 300 index of top European shares <>
fell 0.15 percent, after notching up a gain of 1.2 percent in
August, only its second monthly gain in 10 months. Commerzbank
fell more than 10 percent while Allianz was flat.
"The price paid by Commerzbank is at the high end... The
main problem is the execution risk and how the two are going to
bring the operating costs together," said Bernard McAlinden,
market strategist at NCB Stockbrokers.
MSCI world equity index <.MIWD00000PUS> fell 0.7 percent,
having fallen 2.3 percent in August to post its third
consecutive monthly loss.
U.S. markets were closed for the Labor Day holiday.
Government bonds in major economies benefited from flight to
quality flows, with September Bund futures rising 36 ticks
<FGBLU8> and short sterling rate futures rising 15 ticks
<0#FSS:>.
(Editing by Stephen Nisbet)
