* U.S. stocks fall; weak housing data spurs recession fear
* Yen gains broadly as stocks retreat, risk appetite fades
* Government debt prices up as safety bids return
* Oil rises as OPEC expected to cut supplies
(Recasts with U.S. markets, adds byline; changes dateline;
previous LONDON)
By Herbert Lash
NEW YORK, Oct 17 (Reuters) - A new batch of weak U.S.
housing data on Friday added to growing worries about a
widening global slowdown, helping to pull down U.S. stocks and
curb a rise in crude oil prices and European equity markets.
Government debt prices strengthened and the dollar weakened
on the Commerce Department data for September, which showed
construction starts on U.S. homes fell to a new 17-1/2 year low
and permits for new homes to a nearly 27-year low.
Oil rose back above $70 a barrel on hopes that oil
exporters could cut their output.
The weak economic outlook kept U.S. equities under water
and prospect for tame inflation was bullish for U.S. government
and euro-zone bonds, lifting their prices.
"We're going to stay in a weak housing pattern and that
puts more emphasis on the fact that the economy is falling
deeper into recession," said Kevin Giddis, head of fixed-income
trading at Morgan Keegan in Memphis, Tennessee.
"Rather than being short and shallow, the recession is
getting wider and deeper," Giddis said.
The further deterioration in housing also offset reassuring
profits at manufacturer Honeywell International Inc <HON.N> and
Google Inc <GOOG.O>.
At 10 a.m., the Dow Jones industrial average <> was
down 74.71 points, or 0.83 percent, at 8,904.55. The Standard &
Poor's 500 Index <.SPX> was down 6.72 points, or 0.71 percent,
at 939.71. The Nasdaq Composite Index <> was down 8.49
points, or 0.49 percent, at 1,709.22.
European shares rose nearly 2 percent in choppy trade, led
by drug and energy shares.
The FTSEurofirst 300 <> index of top European shares
was up 2.8 percent at 882.12 points.
Wild swings in stock prices remained a concern.
"This is the most volatile week we've seen," said Thierry
Lacraz, strategist at Swiss bank Pictet in Geneva. "The sole
intelligent thing is to remain on the sidelines and not make
any huge bets."
Crude prices drew support from a decision by the
Organization of Petroleum Exporting Countries to bring an
emergency meeting forward to next week, which raised
expectations of a supply cut.
U.S. light sweet crude oil <CLc1> rose $1.38 to $71.23 a
barrel.
With signs of economic trouble now emerging in Eastern
Europe and Asia, investors have reversed risky trades financed
with low-yielding yen, helping lift the Japanese currency at
the expense of its higher-yielding rivals, such as the euro.
Against the yen, the dollar <JPY=> was down 0.51 percent at
101.08.
The dollar, which benefits from risk aversion because
dollar-based investors repatriate funds, gained on the euro.
The euro <EUR=> was down 0.21 percent at $1.3457. The
dollar was up against a basket of major currencies, with the
U.S. Dollar Index <.DXY> up 0.05 percent at 82.326.
"The focus is shifting from the credit crisis to a looming
global recession," said Omer Esiner, senior currency analyst at
Ruesch International in Washington.
"I'd characterize recent U.S. data as dismal, but no matter
how bad things get here, the global picture looks just as bad,"
he said.
Gold fell more than 3 percent, extending the previous
session's losses, as the dollar firmed against the euro, and
investors sold bullion to cover losses on other markets.
Spot gold prices <XAU=> fell $25.95 to $778.55 an ounce.
Euro-zone government bond futures climbed more than half a
point on thin volume to hit a one-week high, gaining momentum
weak U.S. economic data.
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> was up 2/32 in price to yield 1.6025
percent.
(Reporting by Ellis Mnyandu, Steven C. Johnson, Ellen Freilich
in New York and Joe Brock, Ian Chua, Tyler Sitte and Jan Harvey
in London; Writing by Herbert Lash; Editing by Tom Hals)
