(Corrects bank name to Bank of New York Mellon Corp in 10th
paragraph)
* Wall Street slips as high savings rate sparks concerns
* U.S. dollar slides on China comments on reserve currency
* Oil slips below $70 a barrel on Nigeria amnesty report
* Bonds rise as weak equities enhance save-haven appeal
(Updates with U.S. markets activity; changes dateline,
previous LONDON)
By Herbert Lash
NEW YORK, June 26 (Reuters) - Global shares slid on Friday
after a record U.S. savings rate sparked concerns it may erode
consumer spending and curb recovery, while the U.S. dollar fell
following China's call for a super-sovereign reserve currency.
Weakness in equity markets helped boost the allure of
fixed-income assets. U.S. Treasuries and euro zone government
debt prices rose, sending U.S. benchmark yields to their lowest
in nearly four weeks as Bund futures hit a one-month high.
Oil slipped below $70 a barrel after Nigeria said it would
halt fighting rebels during a 60-day amnesty period for
militants and release a suspected rebel leader if he accepted
an amnesty offer.
Data showed that while U.S. consumer spending and income
both rose in May as government stimulus spread through the
economy, much of the money was being socked away.
U.S. savings jumped to a record annual rate of $768.8
billion, the highest level since records began in 1959, and the
saving rate climbed to a 15-year high of 6.9 percent. (See
[])
"We need people to spend money in order to keep the economy
humming," said Joe Kinahan, chief derivatives strategist at
online brokerage thinkorswim Group in Chicago. "The consumer
has been the stalwart of the economy at this point, and we
still need them to be."
At 1:27 p.m., the Dow Jones industrial average <> was
down 51.17 points, or 0.60 percent, at 8,421.23. The Standard &
Poor's 500 Index <.SPX> was down 3.18 points, or 0.35 percent,
at 917.08. The Nasdaq Composite Index <> was up 3.96
points, or 0.22 percent, at 1,833.50.
Stocks slid even as a separate report showed consumer
sentiment rose in June to the highest since February 2008 as
hopes grew the recession is abating. []
Energy shares also weighed on equity markets as oil future
fell.
The rise in personal income was abnormally high because of
government stimulus payments to people and social security,
said Richard Hoey, chief economist at Bank of New York Mellon
Corp in New York. But he said the jump is a one-month
phenomenon.
"You're going to get a lot of commentary about the
super-high savings rate, but the reason the rate was high was
because of this abnormal burst of income at a rate that is
clearly unsustainable," Hoey said.
European shares closed lower as drugmakers fell, led by
Sanofi-Aventis <SASY.PA>, while commodities retreated as they
tracked lower crude and metal prices.
The pan-European FTSEurofirst 300 <> index of top
shares closed down 0.1 percent at 844.59 points after initially
rising.
"Over the course of the day, sentiment has seemed to have
dissipated," said Peter Dixon, strategist at Commerzbank. "I
also think it is a bit of a reaction to the negative day in the
U.S. Investors just want to sell and take profits," he said.
U.S. TREASURY DEBT GAINS
Bond investors shrugged off the personal income data and
focused instead on a tame reading of price pressures in the
same report, suggesting the Federal Reserve's super-easy
monetary policy has yet to spur inflation. []
Bonds also were still on a firm footing after this week's
record auction of $104 billion, calming worries over the
mounting U.S. debt.
The benchmark 10-year U.S. Treasury note <US10YT=RR> was up
5/32 in price to yield 3.53 percent. The 2-year U.S. Treasury
note <US2YT=RR> was up 1/32 in price to yield 1.11 percent.
Next week, the euro-zone market will see roughly 16 billion
euros of supply, which will be more than offset by redemption
payments amounting to around 24 billion euros, traders said.
The 10-year Bund yield <EU10YT=RR> was at 3.388 percent,
after earlier easing to a six-week low of 3.383 percent,
Reuters charts showed.
DOLLAR TUMBLES, OIL DROPS
China's central bank did not mention the U.S. dollar by
name but said it was a serious defect that one currency should
tower over all others. []
The sheer size of China's holdings of U.S. debt means such
remarks are likely to continue to put pressure on the dollar.
"The Chinese own a tremendous amount of U.S. Treasuries,"
said Fabian Eliasson, vice president of currency sales at
Mizuho Corporate Bank in New York. "They are obviously worried
about inflation and losing value on their investments."
The dollar was down against a basket of major currencies,
with the U.S. Dollar Index <.DXY> down 0.92 percent at 79.661.
The euro <EUR=> was up 0.77 percent at $1.4092, while
against the yen, the dollar <JPY=> was down 0.81 percent at
95.12.
The amnesty offer in Nigeria reversed early sharp gains in
the oil market, which followed a statement by Nigerian rebels
that they had blown up a wellhead in a Royal Dutch Shell
<RDSa.L> oilfield.
U.S. light sweet crude oil <CLc1> fell $1.19 to $69.04 a
barrel.
Spot gold prices <XAU=> rose $1.85 to $940.60.
Asian shares rose as higher oil and metals prices boosted
resource stocks. MSCI's index of Asian stocks excluding Japan
<.MIAPJ0000PUS> climbed 1.9 percent but remains below
eight-month highs scaled at the start of June. Japan's Nikkei
average <> ended up 0.8 percent at 9,877.39.
(Reporting by Leah Schnurr, Rodrigo Campos, Wanfeng Zhou,
Burton Frierson in New York; Nick Vinocur, Christopher Johnson,
Ian Chua and Joanne Frearson in London; Writing by Herbert
Lash; Editing by Jan Paschal)
