* U.S. stocks slip on AIG's big loss; Wal-Mart sales miss
* European shares fall as credit crisis hits bank results
* Euro at seven week-low vs dollar; ECB keeps rates steady
*
(Recasts with U.S. markets, changes byline, dateline, previous
LONDON)
By Herbert Lash
NEW YORK, Aug 7 (Reuters) - Concerns about economic growth
and corporate profits pushed global shares lower on Thursday,
overshadowing optimism among investors that interest rates will
stay unchanged, a view that helped government debt rally.
The euro slid to a new seven week-low against the dollar
after the European Central Bank left interest rates unchanged,
as expected. The dollar index rose to a 5-1/2-month high after
a surprise rise in the U.S. pending home sales index for June.
ECB President Jean-Claude Trichet said risks to economic
growth were starting to materialize, leading investors to rule
out more euro zone rate rises this year and the euro to
weaken.
A similar view on the other side of the Atlantic took hold,
spurred by a jump in U.S. jobless claims. The Federal Reserve
-- the U.S. central bank -- is seen as unlikely to raise
benchmark interest rates while unemployment is rising.
Renewed signs of shaky economies revived investors'
appetite for safe-haven government bonds, sparking a rally in
U.S. Treasuries and euro zone government debt.
A slew of major banks in Europe reported lower profits,
took more write-downs on risky assets and braced for tough
times well into 2009. Difficult conditions will persist but a
few banks were also optimistic that opportunities would arise
from the turmoil, helping send some bank shares higher.
In the United States, a big loss at insurer American
International Group <AIG.N> rattled investors and Wal-Mart
Stores Inc <WMT.N> missed July sales forecasts, heightening
concerns about consumer spending and the profit outlook.
A government report showing the number of Americans in the
latest week who filed for jobless benefits jumped to the
highest in more than six years also unnerved investors.
Shares of AIG, the world's largest insurance company, fell
17 percent to $24.02, their biggest fall in more than two
decades. Wal-Mart shares declined more than 4 percent.
The S&P financial services <.GSPF> and retail sectors
<.RLX> both declined about 2 percent.
"We still believe that there is weakness in the economy;
however, there is also inflation," said Rob Stein, managing
partner of Chicago-based Astor Asset Management.
Before 1 p.m. (1700 GMT), the Dow Jones industrial average
<> was down 83.29 points, or 0.71 percent, at 11,572.78.
The Standard & Poor's 500 Index <.SPX> was down 7.48 points, or
0.58 percent, at 1,281.71. The Nasdaq Composite Index <>
was up 6.31 points, or 0.27 percent, at 2,384.68.
In Europe, Britain's Barclays <BARC.L>, Germany's Dresdner
<ALVG.DE> and Belgian KBC <KBC.BR> unveiled more than $5
billion in further asset write-downs. Since the credit crisis
began a year ago, banks around the world have lost more than
$400 billion from exposure to risky assets.
The FTSEurofirst 300 index <> of top European shares
ended down 0.25 percent at 1,190.06.
Not all the news was dreary. Barclays was among the top
gainers in the European banking sector, rising 1.6 percent
after the company beat expectations, despite write-downs.
"Generally, the overall tone of the banks had been better.
I think not just in the UK but in America too," said Mike
Lenhoff, chief strategist and head of research at Brewin
Dolphin in London.
"They haven't been quite as dismal as you might have been
led to believe on the back of all the things we know have been
going on," he said.
Oil bounced off three-month lows to trade up slightly as
supply concerns returned to a market that has seen prices
tumble over the past month amid growing evidence of slower fuel
demand.
The Baku-Tbilisi-Ceyhan pipeline, with a capacity of one
million barrels per day of Azeri light crude, remained shut
after a fire for which Kurdish separatists took
responsibility.
U.S. light sweet crude oil <CLc1> rose 29 cents to $118.87
per barrel.
Government debt rose.
The two-year Schatz yield <EU2YT=RR> dropped well below the
ECB's 4.25 percent benchmark rate to a session low of 4.077
percent.
The benchmark 10-year U.S. Treasury note <US10YT=RR> rose
28/32 to yield 3.95 percent. The 30-year U.S. Treasury bond
<US30YT=RR> jumped 1-22/32 to yield 4.59 percent.
The dollar rose against major currencies, with the U.S.
Dollar Index <.DXY> up 0.37 percent at 74.577. Against the yen,
the dollar <JPY=> fell 0.15 percent at 109.55
The euro <EUR=> fell 0.60 percent at $1.5319.
U.S. gold futures erased initial gains to turn lower after
the dollar surged. Gold prices <XAU=> fell $7.00 to $871.60.
Asian stocks fell and government bonds rose on a sense of
gloom among investors about financial sector instability and a
worsening global growth outlook.
Japan's Nikkei share average <> fell about 1 percent
and Asia-Pacific stocks outside Japan <.MIAPJ0000PUS> edged
down 0.14 percent, within sight of a 16-month low plumbed on
Tuesday.
(Reporting by Ellis Mnyandu, Walter Brandimarte, Ellen
Freilich and Gertrude Chavez-Dreyfuss in New York and Ian Chua,
Santosh Menon and Amanda Cooper in London; Editing by James
Dalgleish)
