(Adds close of U.S. markets)
By Herbert Lash
NEW YORK, March 13 (Reuters) - Gold shot past $1,000 for
the first time and the dollar hit new lows on Thursday as
stocks managed a gain in volatile trading amid mixed signs that
the subprime housing crisis has reached its nadir.
Equity markets had moved sharply lower earlier amid concern
over a looming default on $16.6 billion in debt by an affiliate
of buyout firm Carlyle Group.
Later, U.S. stocks rebounded and European shares pared
losses after Standard & Poor's said major banks have seen the
worst of the housing finance charges and a bailout plan for
homeowners gained momentum in Washington. U.S. Treasury prices
fell on the news as flight-to-quality investors pulled back on
the signs of an abating crisis,
The rebound in U.S. stock prices came as oil, gold and the
dollar set new records, all driven outside by speculative
buying by a sour outlook on the U.S. economy.
Oil rose to $111 a barrel, the seventh straight record in
as many trading days as a weak dollar overshadowed an increase
in U.S. crude inventories. U.S. crude <CLc1> settled up 41
cents at $110.33.
Gold futures surged above the historic $1,000 mark, while
the dollar plunged below 100 yen for the first time in over a
decade as it again hit a new low versus the euro.
"A lot of these markets seem to be linked lately. I'm
seeing the dollar strengthen, crude weaken, equities are doing
better and bonds are selling off," said Todd Clark, managing
director of stock trading at Nollenberger Capital Partners in
San Francisco.
Standard & Poor's said some of the subprime-related
write-downs are larger than any reasonable estimate of actual
losses. But it boosted its previous estimate of write-downs by
$20 billion to $285 billion.
"We believe that the largest players, such as Merrill Lynch
& Co Inc and Citigroup Inc, have rigorously and conservatively
valued their exposures to subprime asset-backed securities such
that most of the damage should be behind them," S&P said.
The subprime-related write-downs have taken a major toll on
bank balance sheets, sparking a reluctance to extend credit and
triggering margin calls and forced selling across markets.
Shares of Merrill Lnych <MER.N>, which had been down almost
3 percent, and Citigroup <C.N>, down as much as 5.5 percent,
pared losses to a 1.7 percent decline.
Other financial shares also rose, including heavily
battered home mortgage lenders Fannie Mae <FNM.N>, up more than
8 percent, and Freddie Mac <FRE.N>, up more than 5 percent.
The Dow Jones industrial average <> added 35.09 points,
or 0.29 percent, to 12,145.33. The Standard & Poor's 500 Index
<.SPX> gained 5.12 points, or 0.39 percent, to 1,313.89. The
Nasdaq Composite Index <> rose 13.55 points, or 0.60
percent, to 2,257.42.
In the latest fallout, Carlyle Capital Corp <CARC.AS> said
late on Wednesday lenders were likely to seize its remaining
assets after it defaulted on about $16.6 billion of debt.
"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.
In Europe, the FTSEurofirst 300 <> closed down 1.3
percent at 1,268.46 points, taking losses for the year to 15.8
percent.
Banks trimmed intraday losses in excess of 4.5 percent
after the S&P report on bank write-downs, but the DJ Stoxx bank
index was the leading sectoral loser, falling 2.8 percent.
Earlier in Asia, Japan's Nikkei benchmark <> sank to a
new 2-1/2 year closing low, down 3.3 percent at 12,433.44.
Based on the latest available data, the Dow Jones
industrial average <> rose 35.50 points, or 0.29 percent,
to end unofficially at 12,145.74. The Standard & Poor's 500
Index <.SPX> was up 6.71 points, or 0.51 percent, at 1,315.48.
The Nasdaq Composite Index <> was up 19.74 points, or 0.88
percent, to close unofficially at 2,263.61.
The dollar plunged below 100 yen and hit a record low
against the euro as worries deepened about a U.S. recession.
The dollar also approached parity with the Swiss franc for
the first time ever.
"We are seeing tremendous pressure on the dollar, and if
you look at the reasons why the dollar is so unpopular, it's
very difficult to see any of those factors changing in the next
few months," said Mike Moran, currency strategist at Standard
Chartered in New York.
Oil prices extended a rally that has added nearly 30
percent to prices in just over a month, amid all-time weakness
in the dollar.
The active U.S. gold contract for April delivery <GCJ8> in
New York settled up $13.30, or 1.4 percent, at $993.80 an
ounce. It had soared to a record high of $1,001.50.
"I think there is more upside for gold and generally the
precious metal complex because the Fed is going to be
delivering a very negative real interest rate environment and
that is great for gold," said Michael Lewis, global head of
commodities research at Deutsche Bank.
U.S. Treasury debt prices retreated rapidly as U.S. stocks
recovered.
Stocks rebounded from early losses, pushing benchmark
10-year notes <US30YT=RR>down 30/32 for a yield of 3.55
percent, up 11 basis points.
(Reporting by Herbert Lash. Editing by Richard Satran)
