* U.S. equities recover, led by rally in defensive stocks
* U.S. dollar, yen firm as caution reigns on wider markets
* Oil slides 4.0 percent on concerns over world's rebound
(Adds close of U.S. markets)
By Herbert Lash
NEW YORK, July 6 (Reuters) - Widespread doubts about the
strength of the world's economic recovery hit crude oil and
commodity prices on Monday, helping the yen to gain broadly and
the U.S. dollar to edge up as investors shunned risk.
Global equity markets fell, pulled lower by energy and raw
materials-linked stocks, but the Dow and broad S&P 500 index
rose in a late-day rally as investors snapped up defensive
stocks amid continued concern over the economic outlook.
The trigger for the sell-off in commodity prices was the
weaker-than-expected U.S. unemployment data released last
Thursday before a U.S. holiday on Friday. The Reuters-Jefferies
CRB index <.CRB>, a global commodities benchmark, fell 2.3
percent.
Crude oil settled 4 percent lower, at $64.05 a barrel, on
the New York Mercantile Exchange <CLc1> as doubts over a
potential rebound spurred investor risk aversion. Earlier,
crude prices fell to a five-week low of $63.40.
When risk aversion rises, investors cut holdings of stocks
and higher-yielding currencies and often buy back yen and the
U.S. dollars that were used to finance the trades.
"Belief was building that we would see a straight-line
recovery but a lot of that optimism is coming out of the market
in a big way today," said Mark Frey, head trader at Custom
House, a currency services firm in Victoria, British Columbia.
"So it's a classic risk-aversion move, with global equities
coming off and commodities down, causing commodity currencies
to take it on the chin while boosting the dollar and yen."
U.S. gold futures fell toward $920 an ounce as tumbling
crude oil prices reinforced the view that inflation was nowhere
imminent, lessening bullion's appeal as a store of value.
August <GCQ9> gold futures settled down $6.70 to $924.30 an
ounce in New York.
U.S. stocks initially followed the rest of the world lower
as weakness in last week's June employment report still cast a
pall over Wall Street, said Robert Auer, senior portfolio
manager of SBAuer Funds in Indianapolis.
"The market is now wanting to see what the earnings season
has in store," Auer said. "And it's not just what the numbers
are. It's going to be what the companies say that's going to be
more important."
The Dow Jones industrial average <> closed up 44.13
points, or 0.53 percent, at 8,324.87 and the Standard & Poor's
500 Index <.SPX> rose 2.30 points, or 0.26 percent, at 898.72.
But the Nasdaq Composite Index <> fell 9.12 points, or
0.51 percent, at 1,787.40.
While data released early Monday by the U.S. Institute for
Supply Management showed the service sector contracted in June
at a slower pace than expected, last week's much
worse-than-expected U.S. jobs report colored market sentiment.
Shares of aluminum producer Alcoa Inc AA.N slid 6.1
percent, making it the top drag on the Dow. Alcoa kicks off the
second-quarter earnings season on Wednesday.
American Express <AXP.N>, consumer products maker Procter &
Gamble <PG.N> and drugmaker Merck <MRK.N> led the Dow higher.
European equities fell for a third straight session as
recovery concerns took their toll on financial, energy and
basic resources stocks. []
The FTSEurofirst 300 <> index of top European shares
closed down 1.1 percent at 833.03 points, its lowest close
since May 13.
Britain's top share index, the FTSE 100 <>, fell 1.0
percent to its lowest close in more than two months, with
miners the main drag. []
The U.S. currency briefly hit a two-week high against the
euro but gave up gains as the Dow and S&P 500 staged a late
return to positive territory.
The dollar fell against a basket of major currencies, with
the U.S. Dollar Index <.DXY> down 0.07 percent at 80.322.
The euro <EUR=> was up 0.17 percent at $1.3985, while
against the yen, the dollar <JPY=> was down 0.72 percent at
95.34.
The benchmark 10-year U.S. Treasury note <US10YT=RR> fell
1/32 in price to yield 3.50 percent. The 2-year U.S. Treasury
note <US2YT=RR> was up 2/32 in price to yield 0.95 percent.
Copper fell more than 3.0 percent to near two-week lows and
gold slid more than 1.0 percent as the dollar strengthened
Doubts about the staying power of a global recovery kept
Asian stocks soggy and currencies subdued. Japan's Nikkei
<> fell 1.38 percent and the MSCI index of Asian stocks
outside of Japan eased 1.5 percent <.MIAPJ0000PUS>.
(Reporting by Leah Schnurr, Richard Leong, Steven C.
Johnson,Rebekah Kebede and Frank Tang in New York, Simon
Falush, Rebekah Curtis, Martina Fuchs and Kirsten Donovan in
London; Peter Starck in Frankfurt; writing by Herbert Lash)
