By Richard Satran
NEW YORK, Feb 11 (Reuters) - Wall Street managed a recovery
on Monday after the biggest weekly loss in five years, despite
European stock market losses amid fresh signs that the credit
crunch may have a widening impact on major companies.
The world's largest insurer, American International Group
Inc <AIG.N>, said difficulty in valuing its credit derivatives
portfolio had triggered auditor questions, and its stock slid
12 percent in value. The news was further confirmation that
credit worries sparked by the subprime mortgage crisis continue
to spread to new sectors beyond banking.
"There is an increasing realization that this is not (just)
a subprime (mortgage) issue; this is a credit bubble issue that
is hitting everywhere," said T.J. Marta, fixed income
strategist with Royal Bank of Canada Capital Markets in New
York.
Worries over AIG pushed European stocks lower as well, with
financials such as Societe Generale <SOGN.PA> and Fortis
<FOR.AS> among the decliners.
"The concerns about AIG are affecting the financials and are
clearly having a negative effect on sentiment," said Michael
James, senior trader at regional investment bank Wedbush Morgan
in Los Angeles.
Credit spreads widened and the AIG jitters triggered a
flight to safety that favored U.S. Treasury debt.
Wall Street managed its recovery on the back of Dow
component General Motors Corp <GM.N>, up more than 5 percent to
$27.12. There was no specific news on the carmaker, though
investors looked at it and other stocks as ripe for bargain
hunting. Another recently hard-slammed stock, Apple Inc
<AAPL.O>, jumped nearly 4 percent to $129.45 after falling
dramaticaly in recent weeks. It carried other tech stocks
higher.
The Dow Jones industrial average <> closed up 0.48
percent at 12,240.01, according to preliminary figures. The
tech-heavy Nasdaq Composite Index ended up 0.66 percent at
2,320.06.
U.S. crude oil <CLc1> jumped to a one-month high after
Venezuela threatened to cut off oil shipments to the United
States in a dispute with Exxon Mobil Corp <XOM.N> over payments
for nationalized properties. It gained 2 percent to nearly
$94.
The yen climbed broadly as investors grew more risk-averse,
while the euro relinquished gains against the dollar as the
market weighed inflation remarks from monetary policy-makers.
Two-year U.S. Treasury note yields were trading not far
above their lowest levels since 2004 as investors sought
shelter in the highest-rated government securities. Benchmark
10-year Treasury note <US10YT=RR> prices, which move inversely
to yields, rose 11/32 for a yield of 3.61 percent, down from
3.65 percent late on Friday.
"There are all these rumors of securities dealers losing a
lot more money in subprime, so there has still been better
buying in Treasuries even though there has been some buying in
stocks," said Ted Ake, head of bond trading at Mizuho
Securities USA in New York.
Worries about a deeper global economic slowdown battered
European equities earlier in the day and hit the dollar as
commodity prices soared, adding inflation fears to the mix.
The FTSEurofirst 300 index <> of top European shares
closed 0.9 percent lower at 1,290.9 points.
Copper prices touched their highest in more than three
months early in the day in London. U.S. wheat futures initially
surged more than 5 percent before dropping back a few cents.
Platinum <XPT=> hit a record high of $1,915 an ounce, bringing
its rise this year to 25 percent. Gold <XAU=> was steady, but
at $925 an ounce, near its all-time high of $936.50.
The euro <EUR=> was initially up 0.3 percent before
drifting to a lower close after comments from European Central
Bank policy-makers which dampened speculation about a rate cut.
Governing Council member Axel Weber told a German newspaper
that the ECB had not relaxed its view on inflation risks.
The dollar was down 0.6 percent at 106.72 yen <JPY=>.
The Japanese currency benefited from the risk-averse mood,
as worries about global growth and falling equity markets
prompted currency investors to exit risky trading bets funded
by cheap borrowing in the yen.
(Editing by Jonathan Oatis)
