* Global stocks slide as months-long rally festers
* Oil falls toward $70 on brimming U.S. stockpiles
* Yen gains broadly as risk appetite sours
* Bonds flat; stock loss offsets pre-auction sale
(Updates with U.S. markets activity, changes dateline;
previous LONDON)
By Herbert Lash
NEW YORK, Aug 27 (Reuters) - Crude oil fell for a third day
and global equity markets slid anew on Thursday as nagging
doubts about the strength of economic recovery damped a rally
that had propelled world stocks to 10-month highs this week.
The yen climbed across the board, hitting a five-week high
against the U.S. dollar, as the pullback in equities raised
concerns that a rally on greater risk appetite may have been
overdone. []
Euro zone government debt fell, easing off four-month peaks
reached earlier in the day, thanks to stronger-than-forecast
German inflation and data on U.S. growth. []
But U.S. Treasury debt prices pared losses as the sell-off
on Wall Street renewed a safety bid for bonds and offset
selling to make room for a $28 billion auction of seven-year
notes. []
After a strong run-up in commodity and equity markets since
stocks slumped to decade lows in March, analysts and investors
were questioning whether prices had overshot demand.
"With a large supply overhang still intact across all
petroleum groups, any bullish fundamental case must rely
entirely upon future demand expectations," said Jim Ritterbusch
of oil consultancy Ritterbusch and Associates.
U.S. crude for October <CLc1> fell 58 cents to $70.85 a
barrel, after earlier falling as low as $69.83. Crude hit a
10-month peak of $75 on Tuesday before beginning a march
lower.
Brent crude <LCOc1> lost 35 cents to $71.30 a barrel.
Copper rose as investors were encouraged by improving U.S.
economic data that lifted hopes of recovery, but analysts
warned prices had exceeded fundamentals. []
The U.S. economy shrank less than expected in the second
quarter, despite a record drop in inventories, and fewer
workers filed new claims for jobless benefits last week, a sign
the economy was starting to heal. []
"We've been expecting to see signs of improvement in the
economy consistent with the belief that we'll get growth in the
third quarter for the first time in over a year," said David
Resler, chief economist at Nomura Securities in New York.
"What we're waiting to see are clearer signs that the
bounce in growth in the third quarter will be enough to sustain
some momentum for further growth down the road," Resler said.
Equities investors, however, were unimpressed by the latest
data on the U.S. economy, which showed gross domestic product
shrank by 1 percent in the second quarter, unchanged from the
government's initial estimate and better than the 1.5 percent
contraction that economists had expected.
The Dow edged into positive territory as shares of Boeing
Co <BA.N> rose 8.8 percent on news that its 787 Dreamliner
would finally make its first flight by year's end.
[]
Shortly after 1 p.m., the Dow Jones industrial average
<> was up 1.59 points, or 0.02 percent, at 9,545.11. The
Standard & Poor's 500 Index <.SPX> was down 3.49 points, or
0.34 percent, at 1,024.63. The Nasdaq Composite Index <>
was down 15.43 points, or 0.76 percent, at 2,009.00.
"People are starting to say this may not be the V-shaped
recovery that everyone is talking about, so I might want to
take a little bit off the table," said Doug Roberts, chief
investment strategist at Channel Capital Research.com in
Shrewsbury, New Jersey.
European shares closed lower in a choppy session after
banking stocks retreated from earlier gains and chemical makers
slipped. []
The pan-European FTSEurofirst 300 <> index of top
shares closed down 0.5 percent at 968.67 points.
The dollar <JPY=> was 0.7 percent lower at 93.63 yen,
having fallen as low as 93.38 yen on Reuters trading platform,
its lowest since July 22.
The euro was almost flat at about $1.4261 <EUR=>.
Gold rose in Europe. Spot gold <XAU=> was bid at $945.80 an
ounce, up from a closing bid of $944.10.
The benchmark 10-year U.S. Treasury note was down 1/32
<US10YT=RR> with the yield at 3.4384 percent.
Shares in Japan fell 1.6 percent after the Nikkei average
<> hit a 10-month closing high the previous day.
The MSCI index of Asia-Pacific shares excluding Japan
<.MIAPJ0000PUS> dropped 0.8 percent.
(Reporting by Richard Valdmanis, Gertrude Chavez-Dreyfuss,
Rodrigo Campos and Richard Leong in New York; Jessica Mortimer,
Jon Hopkins and Joanne Frearson in London; writing by Herbert
Lash; Editing by Leslie Adler)
