* Wall Street follows Europe, Asian markets lower
* Bond prices rise as flu jitters spur safety bid
* Dollar, yen gain as pandemic fears stoke risk aversion
* Oil falls below $49 a barrel on worries of slowdown
(Updates with U.S. markets; changes dateline, previous
LONDON)
By Herbert Lash
NEW YORK, April 27 (Reuters) - Stocks worldwide and oil
prices fell on Monday on fears that a possible flu pandemic
could further weaken a global economy thrown into recession by
a financial crisis.
The dollar and yen strengthened on increased risk aversion
as the flu outbreak, which began in Mexico and spread to the
United States and Europe, threatened to put a halt to signs of
a nascent global recovery.
The dollar is a safe-haven in times of stress. Gold, often
a recipient of money flows when investor risk aversion rises,
fell due to a stronger dollar. Gold also was driven lower by
investors who cashed in gains from a four-week high.
"Concerns Mexican swine flu could become pandemic after
President Obama declared it a public health emergency helped
drive the dollar and the yen higher, with the Mexican peso the
hardest hit," said Meg Browne, currency strategist at Brown
Brothers Harriman in New York.
The Mexican peso <MXN=> fell 4.16 percent to 13.86 a
dollar, while the country's IPC stock index <> fell 4.5
percent on. Yields on Mexico's benchmark 10-year peso bond
<MX10YT=RR> rose 14 basis points to 7.86 percent.
Benchmark U.S. stock indexes fell more than 1 percent after
the market opened but later pared losses. Investors worried a
possible flu pandemic could complicate government efforts
worldwide to revive the economy.
The outbreak in Mexico has killed more than 100 people.
The early sell-off on Wall Street was broad based, with
airlines and shares of energy companies among the biggest
casualties. Airline shares sold off in Asia and Europe on fears
world travel will suffer if the flu outbreak spreads further.
The AMEX Airline index <.XAL> slid 9.6 percent, with shares
of major airlines, including Continental <CAL.N>, Delta Air
Lines <DAL.N>, UAL Corp <UAUA.O> and American Airlines parent
AMR Corp <AMR.N> all down more than double digits.
The CBOE Volatility Index <.VIX>, often called Wall
Street's fear gauge, rose almost 6 percent to 38.97.
The MSCI world equity index <.MIWD00000PUS> fell 1.3
percent.
U.S. Treasury debt prices rose on a safety bid, temporarily
overshadowing worries about large supplies of U.S. government
debt being sold to finance a bailout of the U.S. financial
system and to stimulate an economic recovery.
"The global equity markets saw a severe overnight decline
in response to concerns over the swine flu outbreak," said John
Spinello, senior vice president and chief fixed-income
technical strategist at Jefferies & Co in New York.
"The reaction was a safe-haven bid for Treasuries,"
Spinello said.
Benchmark 10-year Treasury note yields <US10YT=RR> eased
from near 3 percent late last week to 2.94 percent in early
dealings. Their price, moving inversely to yield, rose 17/32 to
98-13/32. Two-year Treasury notes <US2YT=RR> rose 4/32, their
yields easing to 0.90 percent from 0.97 percent on Friday.
Oil prices fell nearly 6 percent to below $49 a barrel.
U.S. crude oil futures for June delivery were down $3.16 at
$48.39 a barrel by 1302 GMT, erasing some of Friday's gains of
$1.93 that brought the contract to settle at $51.55.
(Reporting by Edward Krudy, Ellen Freilich and Nick Olivari in
New York; Jane Merriman and Jan Harvey in London; writing by
Herbert Lash; Editing by Kenneth Barry)
