* Global stocks slide on economic view; Dow up on oil fall
* Oil prices fall to three-month low of below $120 barrel
* Dollar rises vs yen as oil falls; demand capped vs euro
* Poor global economic outlook spurs modest bid for debt
(Recasts with U.S. markets, adds byline; dateline previous
LONDON)
By Herbert Lash
NEW YORK, Aug 4 (Reuters) - Oil prices fell to a
three-month low on Monday, paring steep losses in U.S. stocks,
but a growing view that the U.S. economy's malaise is spreading
worldwide dampened global equity markets and drove a modest bid
for government debt.
Crude <CLc1> tumbled more than $5 to below $120 a barrel as
signs of increased OPEC output and an economic slowdown trumped
concerns about supplies driven by a tropical storm in the Gulf
of Mexico and Iran's nuclear program dispute with the West.
The sell-off in oil prices led the dollar higher against
the yen on Monday, but demand versus the euro was capped as
traders awaited a host of central bank meetings this week. The
Federal Reserve, the Bank of England and the European Central
Bank will all issue rate decisions.
Another round of dreary U.S. and euro zone economic news
helped boost demand for safe-haven government debt on both
sides of the Atlantic. Gains, however, were limited ahead of
the Fed's policy-setting meeting on Tuesday.
Fears that a U.S. housing slump will spawn further losses
and compound the troubles facing the U.S. economy and elsewhere
drove financial stocks lower in the United States and Europe.
"There's a feeling we're still in a bear market. It's kind
of 'take cover' today," said Tim Ghriskey, chief investment
officer of Solaris Asset Management in Bedford Hills, New
York.
Before 1 p.m., the Dow Jones industrial average <> was
down 15.88 points, or 0.14 percent, at 11,310.44. The Standard
& Poor's 500 Index <.SPX> slid 7.01 points, or 0.56 percent, at
1,253.30. The Nasdaq Composite Index <> was off 18.20
points, or 0.79 percent, at 2,292.76.
News that WCI Communities <WCI.N> , a U.S. builder of
luxury homes whose business is concentrated in Florida, filed
for bankruptcy protection, also unnerved investors.
Bank of America Corp <BAC.N> fell more than 4 percent,
Citigroup <C.N> was off nearly 4 percent and JPMorgan Chase
<JPM.N> slid more than 3 percent.
The S&P financial index <.GSPF> fell 2.5 percent, while the
Dow Jones home construction index <.DJUSHB> lost 2.1 percent.
CREDIT CRUNCH IN SPOTLIGHT
European shares fell for a third session in a row after
results from HSBC <HSBA.L>, Europe's largest bank, highlighted
the credit crunch's impact on banks. A drop in metal prices
sapped mining shares.
Shares in HSBC were among the largest individual drags on
the European market after it said first-half profits fell 28
percent, in line with forecasts, and took a $14 billion hit on
bad debts on U.S. home loans.
Despite strong growth in Asia and "reasonable" earnings,
HSBC's results showed problems in the United States continue,
said Henk Potts, a strategist at Barclays Stockbrokers.
"The credit crunch continues to bite and even for some of
the more successful financial institutions it continues to take
its toll," Potts said.
HSBC shares fell 1.1 percent.
Investor morale in the euro zone fell in August to a
five-year low while the jobless rate in Spain hit a 10-year
high in July as consumer confidence plumbed a record low.
U.S. economic data also pointed to a growing credit squeeze
on consumers. U.S. consumer prices jumped at the sharpest rate
in more than a quarter century in June and Americans received
their smallest gain in incomes in a year, also in June.
While the strongest monthly gain in factory orders since
last December beat Wall Street economists' forecasts for a 0.7
percent gain, investors took their cue from the inflation data
and concluded consumers were under growing pressure.
Euro zone government bonds rose, with the 10-year futures
hitting near two-month highs, but U.S. Treasury debt prices
inched down as a higher-than-expected core inflation reading
and the prospect of more supply made investors cautious.
"The bond market is taking its cue partly from what is
happening in equities and also there is just a general
realization that this downturn in economic growth has spread to
other countries," said Joseph DiCenso, fixed income strategist
with Lehman Brothers in New York.
The benchmark 10-year U.S. Treasury note <US10YT=RR> fell
2/32 to yield 3.95 percent. The 30-year U.S. Treasury bond
<US30YT=RR> slid 3/32 yield to 4.57 percent.
The dollar rose against major currencies, with the U.S.
Dollar Index <.DXY> up 0.21 percent at 73.514. Against the yen,
the dollar <JPY=> was up 0.49 percent at 108.19.
The euro <EUR=> rose 0.03 percent at $1.5568.
Oil fell.
Some analysts said a greater-than-expected rise in a gauge
of U.S. core inflation closely watched by the Federal Reserve
may support the case for a U.S. rate hike by year end.
U.S. light sweet crude oil <CLc1> fell $4.10 to $121.00 a
barrel.
Gold erased early session losses as the dollar turned
lower, crude oil retraced an initial decline and U.S. stocks
hit session lows.
Platinum futures tumbled for a second session on demand
worries stirred by last week's poor U.S. auto sales, but
traders expect prices to rebound as the sell-off may be over
done.
Spot gold prices <XAU=> fell $11.05 to $898.50 an ounce.
Asian stocks fell as fears of a recession in the United
States dented shares of Asian manufacturers that rely on U.S.
demand.
Tokyo's Nikkei index <> fell 1.2 percent, dragged down
by the shares in auto makers. The MSCI index of Asian stocks
outside Japan <.MIAPJ0000PUS> fell 0.7 percent at 0600 GMT.
(Reporting by Ellis Mnyandu, Kristina Cooke, John Parry,
Vivianne Rodrigues and Frank Tang in New York and Golnar
Motevalli, Ian Chua and Amanda Cooper; Writing by Herbert Lash.
Editing by Leslie Adler)
