* Global stocks fall as stalled U.S. bailout fuels caution
* Risk-adverse yen gains, bonds rise on rescue uncertainty
* Oil slips to about $105 amid financial market turmoil
* Gold climbs 4 pct as jittery investors seek safe havens
(Recasts with U.S. markets, adds byline; dateline previously
LONDON)
By Herbert Lash
NEW YORK, Sept 26 (Reuters) - Stalled negotiations over
Washington's proposed bailout of the U.S. financial sector
sapped global stocks and lifted safe-havens on Friday as the
crisis kept tight money markets under enormous stress.
Gold jumped 4 percent and the yen climbed broadly as
investors piled into safe assets after talks on the bailout of
troubled banks dragged on and the failure of Washington Mutual,
the biggest bank closure in U.S. history, gnawed at
confidence.
Investors flocked to cash and U.S. and euro-zone government
debt. Renewed jitters also sparked bets the Federal Reserve may
slash key interest rates by as much as half a percentage point
from the current 2 percent by year-end, according to interest
rate futures.
Investors sold high-yielding currencies such as the
Australian dollar and dumped stocks around the world.
"There is risk aversion at the moment and there is a huge
amount of uncertainty and that's why we're seeing gold rally
and the yen being the strongest performer across the board,"
said Shaun Osborne, chief currency strategist at TD Securities
in Toronto.
Central banks injected fresh liquidity into the global
banking system, helping lower soaring inter-bank borrowing
rates, but money markets remained mostly paralyzed.
While investors continued to voice expectations that the
U.S. Congress will approve a bailout package, European and U.S.
equity markets again fell sharply and oil prices, along with
the U.S. dollar, slipped amid widespread uncertainty.
Market jitters again hit Belgian-Dutch bank Fortis
<FOR.AS><FOR.BR> even after it denied it was facing a liquidity
crisis. Fortis said it has a funding base of 300 billion euros
and solid solvency ratios, but its shares plunged 20 percent to
a 15-year low.
"Money markets are more seized up than ever, liquidity
issues are more prevalent than ever," said Bernard McAlinden,
strategist at NCB Stockbrokers in Dublin.
"So severe is the crisis of confidence that any bank that
has funding or leverage issues, quite apart from the quality of
assets, is unnaturally vulnerable in the current environment."
"So severe is the crisis of confidence that any bank that
has funding or leverage issues, quite apart from the quality of
assets, is unnaturally vulnerable in the current environment,"
he said.
Across the Atlantic, the collapse of the largest U.S.
thrift, Washington Mutual <WM.N> ,heightened concerns about the
widening fallout of the credit crisis, as did fresh data on
second-quarter U.S. gross domestic product that revised
downward the government's prior growth estimate.
Wachovia Corp <WB.N> , a large U.S. bank, was among
financial shares taking a knock, falling more than 28 percent
on worries about heavy mortgage losses.
Before 1 p.m., the Dow Jones industrial average <> was
down 28.99 points, or 0.26 percent, at 10,993.07. The Standard
& Poor's 500 Index <.SPX> was down 12.68 points, or 1.05
percent, at 1,196.50. The Nasdaq Composite Index <> was
down 27.41 points, or 1.25 percent, at 2,159.16.
Technology shares took a heavy blow after Research In
Motion <RIM.TO><RIMM.O>, the BlackBerry maker and a tech
bellwether, warned that quarterly profit will fall short of
Wall Street's forecasts. Its shares slid more than 26 percent.
The U.S. economy grew less strongly than previously thought
in the second quarter as consumers boosted spending less
vigorously and businesses trimmed some investments, a sign of a
dimmer outlook even before the financial crisis deepened.
The FTSEurofirst 300 index <> of top European shares
ended down 1.8 percent at 1,104.79 points, with banks taking
the most points off the index. The pan-European index fell 4
percent for the week, and is off nearly 27 percent so far this
year. Miners tracked metal prices sharply lower.
Government debt prices fell. The price of two-year Treasury
notes <US2YT=RR>, the maturity that garners the most safety
bids, was up 8/32 for a yield of 2.044 percent. The benchmark
10-year U.S. Treasury note <US10YT=RR> was up 14/32 to yield
3.81 percent.
The dollar fell. The yen has gained 1.6 percent against the
dollar so far this week and about 3 percent this month amid
heightened pressure in financial markets.
The dollar <JPY=> fell 0.23 percent at 106.16 against the
yen, and the euro <EUR=> rose 0.08 percent at $1.4609.
The dollar rose slightly against major currencies, with the
U.S. Dollar Index <.DXY> up 0.02 percent at 77.019.
Oil also fell, pressured by concerns over the financial
market crisis. Further pressure came as investors, who flocked
into oil and other commodities earlier this year as a hedge
against inflation and a weak dollar, shift into safer havens.
U.S. light sweet crude oil <CLc1> fell $2.81 to $105.21 a
barrel.
Spot gold prices <XAU=> rose $10.50 to $886.20 an ounce.
"The main driver right now is the dollar, but also risk
aversion," said analyst Barbara Lambrecht at Commerzbank in
Germany.
Asian stocks overnight fell. Japan's Nikkei share average
<> shed 0.9 percent, and the MSCI index of Asia-Pacific
stocks outside Japan <.MIAPJ0000PUS> fell 1.7 percent.
(Reporting by Ellis Mnyandu, Richard Leong, Gertrude
Chavez-Dreyfuss in New York and Jamie McGeever, Robert Gibbons,
Humeyra Pamuk, Emelia Sithole-Matarise in London; Writing by
Herbert Lash; Editing by Leslie Adler)
