* 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 declines as traders focus on slowing energy demand
(Adds close of U.S. markets)
By Herbert Lash
NEW YORK, Nov 3 (Reuters) - The U.S. dollar and government
bond prices rose on Monday, while oil prices fell, after poor
U.S. and European manufacturing activity data pointed to a
recession and revived flight-to-safety concerns.
The slide in crude oil prices pulled down shares of energy
companies and trimmed gains in U.S. stocks after equity markets
in Europe and Asia rose earlier on the purchase of shares that
are expected to do well even as economic growth slows.
Unlike in the past month when trading was extremely
volatile, leading major equity indexes to swing more than 3.0
percent each session, markets were relatively calm on Monday.
Factory activity slumped on both sides of the Atlantic in
October, with output slipping to record lows in the euro zone
and U.S. manufacturing 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.
The European Commission said the euro zone had entered a
recession and that economic growth will come to a virtual
standstill in 2009. European banks warned of more big
write-downs and reported a sharp fall in profit as the credit
crisis continues to hit consumers and businesses, prompting
more lenders to tap government funds or seek state rescues.
Oil fell nearly 6.0 percent as the fresh signs of falling
demand in a weak economy overshadowed plans by the Organization
of Petroleum Exporting Countries to rein in output.
The U.S. dollar gained about 1.0 percent against the euro
as the weak economic 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.
Energy shares followed oil prices lower. Shares of Dow
component Chevron <CVX.N> fell 1.22 percent to $73.69, while an
S&P index of energy companies <.GSPE> fell 2.2 percent.
Even the Nasdaq gave up earlier gainers with wireless
technology company Qualcomm <QCOM.O> among its heaviest
weights, which offset a lift from the biotech sector. Qualcomm
fell 2.77 percent to $37.20.
Traders said the market's action was likely to be muted
until after Tuesday's U.S. presidential election.
The Dow Jones industrial average <> closed down 5.58
points, or 0.06 percent, at 9,319.43. The Standard & Poor's 500
Index <.SPX> fell 2.66 points, or 0.27 percent, at 966.09. The
Nasdaq Composite Index <> slid 5.23 points, or 0.30
percent, at 1,726.18.
Verizon<VZ.N> and AT&T <T.N> helped counter-balance the
Dow's tendency to decline. Wachovia said the telephone service
providers were safe havens in an economic slowdown.
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 the 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> rose
16/32 in price to yield 3.91 percent, while the 2-year U.S.
Treasury note <US2YT=RR> added 7/32 in price to yield at
1.44percent.
The dollar rose against a basket of major currencies, with
the U.S. dollar index <.DXY> up 0.77 percent at 86.266. Against
the yen, the dollar <JPY=> added 0.72 percent at 99.15.
The euro <EUR=> fell 0.70 percent at $1.2641 from a
previous session close of $1.2730.
U.S. crude <CLc1> settled down $3.90 at $63.91 a barrel
after October saw the steepest monthly price decline ever for
oil as global demand slowed. London Brent crude <LCOc1> dropped
$4.84 to settle at $60.48 a barrel.
Spot gold prices <XAU=> fell $1.30 to $721.75 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)
