* Global equities slide on fear of worldwide recession
* Dollar retreats after rising to a two-year high vs euro
* Oil prices fall to $63 a barrel, but off 17-month low
(Recasts; adds U.S. markets, byline; changes dateline;
previous LONDON)
By Herbert Lash
NEW YORK, Oct 27 (Reuters) - Risk aversion swept financial
markets on Monday as fears of a global recession bolstered the
dollar and yen while driving equities around the world lower,
sending both U.S. and European stocks to five-and-a-half-year
lows.
Pessimism about the deteriorating global economic outlook
pushed the price of crude oil to a 17-month low below $62 a
barrel at one point and sent the yen to an almost 13-year peak
against the dollar on risk aversion.
Major U.S. stock indexes closed down more than 2 percent
after a see-saw session in which investors cheered the solid
wireless sales at Verizon Communications Inc <VZ.N>, but then
sold off heavily in another wild session where stock prices
swung violently at the end.
Trading was volatile and volume was light in New York, with
stocks falling sharply in the last half hour of trading. With
just four days left in October, the S&P 500 is on track for its
worst month ever in the post-World War Two period.
Hedge funds and mutual funds have been dumping stocks to
raise cash to meet redemptions from their clients, traders
noted, exacerbating the late-day selling.
Earlier in Europe, shares fell to a five-and-a-half-year
closing low following a plunge in Japan that pushed stocks to
26-year closing lows. Most other Asian markets also fell
heavily in chaotic trade as investors feared a flurry of
central bank moves would not be enough to stave off a global
recession.
"It is so negative out there, you felt like a skater
without any skates: it couldn't stay up," said Angel Mata,
managing director of listed equity trading, Stifel Nicolaus
Capital in Baltimore.
"People right now are expecting the worst; a total collapse
of the hedge fund industry with half of them (hedge funds) not
existing any more. Mom and pops with 401ks are saying, I have
had enough and don't want to be in there any more," Mata said.
The Dow Jones industrial average <> closed down 203.18
points, or 2.42 percent, at 8,175.77. The Standard & Poor's 500
Index <.SPX> shed 27.85 points, or 3.18 percent, at 848.92. The
Nasdaq Composite Index <> slipped 46.13 points, or 2.97
percent, at 1,505.90.
Energy companies led the decline on bets a deep global
slowdown will sap demand for energy. ConocoPhillips <COP.N>
shed 5.8 percent to $45.62 as U.S. crude oil futures <CLc1>
slid.
Technology shares also weighed on the broader market, with
Microsoft a top drag on Nasdaq after The Wall Street Journal
reported that defaults on tech financings -- loans that let
companies buy computers, software and other products -- have
spiked this year.
Verizon closed up 10 percent at $27.61.
The dollar climbed to its strongest level against the euro
in about two and a half years, while the yen hovered near
13-year peaks against the dollar. The yen also rose to its
highest level since May 2002 versus the single euro zone
currency despite concern by Group of Seven finance officials
about its excessive volatility.
Both the dollar and yen have been the biggest beneficiaries
of global capital flows as investors unwind carry trades, which
use the low-yielding Japanese currency to buy everything from
higher-yielding currencies to stocks and commodities.
"This is a continuation of deleveraging and unwinding of
risk that has been happening the past week and this has
benefited the yen and the dollar," said Omer Esiner, senior
market analyst at Ruesch International in Washington.
The FTSEurofirst 300 <> index of top European shares
closed down 1.7 percent at 816.04 points -- the lowest close
since May 2003.
The chemicals sector weighed heavily on the benchmark
index, with BASF <BASF.DE> down 10.9 percent, Clariant <CLN.VX>
8.4 percent lower and Wacker Chemie <WCHG.DE> falling 9.7
percent.
Fear of a global recession remained high in other markets,
too, helping push the yield on two-year bunds <EU2YT=RR> to its
lowest in three years.
The price of U.S. government debt, which moves in the
opposite direction of yield, was capped by a slight improvement
of sentiment in short-term funding markets, helped by a Federal
Reserve program to buy commercial paper.
But most Treasury debt turned lower.
The benchmark 10-year U.S. Treasury note <US10YT=RR> fell
10/32 in price to yield 3.71 percent. The 2-year U.S. Treasury
note <US2YT=RR> slipped 5/32 in price to yield 1.57 percent.
The dollar rose against a basket of major currencies, with
the U.S. Dollar Index <.DXY> up 0.54 percent at 87.023.
The euro <EUR=> fell 0.93 percent at $1.2505, while against
the yen, the dollar <JPY=> lost 0.99 percent at 93.34.
U.S. light crude for December delivery <CLc1> settled at
$63.22 a barrel, down 93 cents, its lowest settlement price
since May 29, 2007. London Brent crude <LCOc1> settled down 64
cents to $61.41 a barrel.
Oil prices have dropped by nearly 60 percent from a record
high $147.27 a barrel in July as global economic turmoil dents
fuel consumption around the world.
Gloom about the world economy has had a greater impact than
a decision by the Organization of Petroleum Exporting Countries
on Friday to chop output by 1.5 million barrels per day.
"What OPEC did is constructive, but right now that is
beside the point," said Mike Wittner of Societe Generale.
New York gold futures rose as an intraday rebound in the
battered U.S. stock market provided support to commodities
despite the stronger dollar.
The December gold contract <GCZ8> settled up $12.60 at
$742.90 an ounce in New York.
Japan's Nikkei index <> swung wildly overnight in
Asia, before ending down 6.4 percent at its lowest close since
1982. The MSCI index of Asian stocks outside Japan
<.MIAPJ0000PUS> fell for a fourth consecutive session, losing
3.2 percent.
(Additional reporting by Ellis Mnyandu, Gertrude
Chavez-Dreyfuss, John Parry in New York and Jane Merriman and
Jan Harvey in London and Sarah Marsh and Tyler Sitte in
Frankfurt; Editing by Leslie Adler)
