(Recasts with U.S. markets, changes byline; dateline previous
LONDON)
* Global stocks fall on banking jitters; GM hits 53-yr low
* Oil surges; OPEC chief sees crude at $150-$170 a barrel
* Dollar falls broadly as euro sets record high versus yen
* Bonds rise as financial sector worries renew safety bid
By Herbert Lash
NEW YORK, June 26 (Reuters) - Global stocks reeled on
Thursday on fresh jitters about potential losses at major U.S.
and European banks, while a slumping dollar and a forecast of
crude surging to new heights this summer spurred oil higher.
European shares fell to lows last seen in October 2005 and
the Dow fell to October 2006 lows after Goldman Sachs reignited
fears of further losses in the hard-hit financial sector.
The dollar retreated broadly after the Federal Reserve on
Wednesday said it was holding interest rates at 2 percent.
Investors discounted the chance of a U.S. rate hike any time
soon, which boosted the euro to a record high of 169.45 against
the yen.
Crude jumped more than $4 a barrel, boosted by the weak
dollar and comments by OPEC President Chakib Khelil who said
prices could rise as high as $170 this summer.
U.S. light sweet crude oil <CLc1> rose $3.31 to $137.86.
Spot gold prices <XAU=> rose $24.80 to $910.10. The surge
in gold was linked to a weakening dollar and a generally strong
commodities complex.
Goldman Sach's downgrade of U.S. brokerages to "neutral"
overshadowed the Fed's decision on Wednesday to leave interest
rates steady, sending major stock indexes in the United States
and Europe down more than 2 percent.
Goldman also rattled the auto industry as it cut its rating
on General Motors Corp <GM.N> to sell. GM's shares slumped more
than 11 percent to its lowest price since 1955.
Goldman also put Citigroup <C.N> on its "conviction sell"
list, and forecast write-downs of $8.9 billion at Citigroup and
$4.2 billion at Merrill Lynch <MER.N>. A Sanford C. Bernstein
analyst said Merrill will take $3.5 billion in write-downs.
Shares of Citigroup <C.N> and Merrill Lynch & Co. <MER.N>
fell more than 5.5 percent
"There is a tremendous amount of uncertainty around in the
entire financial services sector because we don't really
understand what they are actually holding and what they are not
holding," said Octavio Marenzi, head of financial services
consultancy Celent in Paris.
The Dow Jones industrial average <> fell 249.72 points,
or 2.11 percent, at 11,562.11. The Standard & Poor's 500 Index
<.SPX> was down 29.54 points, or 2.23 percent, at 1,292.43. The
Nasdaq Composite Index <> was down 64.35 points, or 2.68
percent, at 2,336.91.
Banks were the heaviest weighted losers in Europe.
Dutch-Belgian group Fortis <FOR.BR> was the top percentage
loser, sliding almost 19 percent after saying it would shore up
its balance sheet with measures worth more than 8 billion euros
($12.54 billion), including issuing new shares.
Barclays <BARC.L> shed 5.8 percent, Credit Suisse <CSGN.VX>
fell 2 percent and Deutsche Bank <DBKGn.DE> slid 3.3 percent.
The FTSEurofirst 300 <> closed down 2.5 percent at
1,197.02 points in its worst single-day percentage fall since
mid-March.
The weaker dollar helped oil prices rebound, along with the
comments by the president of the Organization of Petroleum
Exporting Countries.
"I forecast prices probably between $150-$170 during this
summer. That will perhaps ease toward the end of the year,"
Khelil told France 24 television in an interview.
The euro strengthened because in contrast to the Fed's
pause, the European Central Bank has repeatedly said it may
lift rates in July to fight inflation,
"The dollar is on the ropes and has further to fall unless
the Fed can correct the market perception that U.S. rates are
on hold indefinitely," said Michael Woolfolk, senior currency
strategist at The Bank of New York Mellon.
he euro <EUR=> rose 0.40 percent at $1.5732.
The dollar fell against major currencies, with the U.S.
Dollar Index <.DXY> down 0.46 percent at 72.575. Against the
yen, the dollar <JPY=> was down 0.81 percent at 106.96.
U.S. and euro zone government bonds rose as credit worries
sparked safe-haven flows and benign U.S. data gave the market
the green light to rally sharply.
The benchmark 10-year U.S. Treasury note <US10YT=RR> rose
10/32 to yield 4.06 percent. The 30-year U.S. Treasury bond
<US30YT=RR> added 14/32 to yield at 4.62 percent.
"The primary reason bonds are doing so well are the
concerns over financials, banking shares are doing particularly
badly," said ABN AMRO strategist Harvinder Sian.
Overnight in Asia, stocks and government bonds mostly rose
after the Federal Reserve on Wednesday kept rates steady and
signaled it was in no hurry to raise them in the near term.
The MSCI index of stocks in the Asia-Pacific region
<.MSCIEF> outside of Japan rose 0.7 percent, while the pan-Asia
index gained 0.2 percent <.MIAS00000PUS>.
Japan's Nikkei share average <> closed slightly lower,
extending a losing streak to six days.
(Reporting by Walker Simon, Steven C. Johnson and Chris Reese
in New York; Ikuko Kao, Jane Merriman, Kirsten Donovan, Jan
Harvey and Patrizia Kokot in London)
(Reporting by Herbert Lash. Editing by Richard Satran)
