* Global equities rise slightly on defensive moves
* Safety bid boosts bonds in gloomy economic outlook
* Dollar gains versus most majors in safe-haven buying
* Oil falls as traders focus on slowing energy demand
(Recasts with U.S. markets, adds byline; changes dateline;
previous LONDON)
By Herbert Lash
NEW YORK, Nov 3 (Reuters) - The U.S. dollar and government
debt prices rose on Monday after dismal data pointing to a
recession in U.S. and European manufacturing prompted a flight
to safety, and defensive moves lifted stock markets.
Economic news dominated markets. European banks warned of
more big write-downs and reported a sharp fall in profit as the
credit crisis continues to slam consumers and businesses,
prompting more lenders to tap government funds or seek state
rescues.
Oil fell below $65 a barrel as traders shifted their focus
back to slowing energy demand in light of the weak economic
data. The dollar gained against the euro as the data prompted
some investors to buy the currency as a safe haven.
"It's counterintuitive, but this may help support the
dollar even as it undermines confidence in the U.S. economy,"
said Michael Woolfolk, senior currency strategist Bank of New
York-Mellon, about the report on manufacturing.
"The dollar has been the beneficiary in this global
financial crisis," he said.
The European Commission said the euro zone is already in a
recession and that the economy will come to a virtual
standstill next year. It called for coordinated European Union
action to support growth.
Manufacturing slid into a recession on both sides of the
Atlantic in October, with output at record lows in the euro
zone and U.S. factory activity slumping to a 26-year low.
"Pretty grim. It means we're in a recession, it's as simple
as that," Robert MacIntosh, chief economist at Eaton Vance Corp
in Boston, said about the U.S. factory data.
While the Institute for Supply Management's index of U.S.
manufacturing activity fell more sharply than expected to 38.9,
MacIntosh said it did not change the assumptions of investors.
"I don't think it adds anything that already wasn't in the
thought process of investors," he said.
European and most U.S. equity markets rose, lifted by
defensive stocks and signs of further thawing in the credit
markets.
Rates that banks charge for lending dollars and euros to
each other fell, extending last week's decline in response to
ongoing central bank measures to supply financial institutions
with cash.
Shortly after 1 p.m., the Dow Jones industrial average
<> was up 23.97 points, or 0.26 percent, at 9,348.98. The
Standard & Poor's 500 Index <.SPX> was down 0.51 points, or
0.05 percent, at 968.24. The Nasdaq Composite Index <> was
up 13.48 points, or 0.78 percent, at 1,734.43.
Dow components Verizon<VZ.N> and AT&T <T.N> helped lead the
blue-chip average higher. Wachovia said telephone companies
Verizon and AT&T were safe havens in an economic slowdown.
Shares of Biogen, among stocks seen positioned to fare
better in a slumping economy, jumped 8.2 percent to $46.05,
putting the stock among the Nasdaq's standouts.
Shares of Gilead Sciences <GILD.O>, another biotech
company, climbed 4.1 percent to $47.78, while those of Amgen
<AMGN.O> advanced 2.8 percent to $61.55.
Utility E.ON <EONGn.DE> added the most points to the
pan-European FTSEurofirst 300 <> benchmark with a 7.1
percent gain, benefiting from a reweighting of Germany's DAX
<> index. The index ended 0.5 percent higher at 933.72.
The FTSEurofirst index shed 12.7 percent in October, its
worst monthly performance in six years. The index is down
nearly 40 percent this year due to the credit crisis, which led
to meltdown in the banking sector and a slowing of the
economy.
Analysts said a recovery in equities continued, but markets
would be hostage to news about the U.S. president election on
Tuesday and monetary policy on Thursday when the European
Central Bank and Bank of England are likely to cut rates.
"Nothing new has turned up that's frightening," said John
Haynes, strategist at Rensburg Sheppard Investment Management.
"Things have looked like repairing, though investors will
wait for the results of the U.S. elections and the rate moves
later in the week."
Other defensive gainers included GlaxoSmithKline <GSK.L>,
up 4.4 percent, Novartis <NOVN.VX>, which rose 2.7 percent and
a 2 percent gain in foods group Nestle <NESN.VX>.
Euro zone government bond prices rose in a busy week as
investors anticipate a raft of interest rate cuts aimed at
containing the fallout from the global financial crisis.
Following rate cuts from the U.S. Federal Reserve and the
Bank of Japan last week, the European Central Bank, Britain and
Australia are all expected to cut interest rates by at least 50
basis points apiece this week.
The benchmark 10-year U.S. Treasury note <US10YT=RR> was up
11/32 in price to yield 3.93 percent, while the 2-year U.S.
Treasury note <US2YT=RR> rose 4/32 in price to yield 1.49
percent.
U.S. light sweet crude oil <CLc1> fell $3.26 to $64.55 a
barrel.
Spot gold prices <XAU=> rose $4.65 to $727.70 an ounce.
The MSCI index of Asia-Pacific stocks outside Japan
<.MIAPJ0000PUS> rose 5.9 percent, up for a fifth consecutive
session. Japan's stock markets were closed for a holiday.
(Writing by Herbert Lash; Editing by Tom Hals)
