* Global stocks fall on fears of ailing banks, economy
* Gold futures shoot above $1,000 in flight to safety
* Government bond prices rise as risk aversion grows
* Dollar basket also gains on renewed safe haven buying
* Oil slumps as deteriorating economy dents demand
(Recasts with U.S. markets, changes dateline; previous
LONDON)
By Herbert Lash
NEW YORK, Feb 20 (Reuters) - Widespread fear about ailing
banks and a deepening recession buzzed through global markets
on Friday, pushing gold futures above $1,000 an ounce as
investors fled risky assets such as stocks, and snapped up
government bonds and the U.S. dollar.
Jittery investors turned assets such as gold that tend to
hold their value in times of economic stress as persistent
worries about ailing banks and a global recession slammed
equity markets in Asia, Europe and the United States.
Oil prices retreated after jumping 14 percent on Thursday
on an unexpected drawdown in U.S. crude stocks. Worries about
demand for energy resurfaced, with sentiment heavily dented by
the sharp slide in the world's equity markets.
European shares and the Dow fell to fresh six-year lows,
while the S&P 500, a broad measure of U.S. equities, slipped
closer to a new bear market low.
U.S. Treasury and euro-zone government debt prices rallied,
driven by deepening anxiety about the fragile banking system.
"The market has bigger fish to fry as it contemplates more
long weekends as big decisions on the banking sector are
confronted," said Alan Ruskin, chief international strategist
at RBS Greenwich Capital in Greenwich, Connecticut.
At 11 a.m., 477 shares of the roughly 3,000 shares listed
on the New York Stock Exchange had set new 52-week lows. Only 2
stocks rose to a 52-week high.
"We are becoming very, very concerned that the public is on
the brink of abandoning their share holdings en masse,
facilitating a literal 'crash' in prices," wrote Dennis Gartman
in The Gartman Letter, which is widely read among investors.
In early trade the Dow Jones industrial average <> was
down 66.35 points, or 0.89 percent, at 7,399.60. The Standard &
Poor's 500 Index <.SPX> was down 6.83 points, or 0.88 percent,
at 772.11. The Nasdaq Composite Index <> was down 0.15
points, or 0.01 percent, at 1,442.67.
Shares of Bank of America Corp <BAC.N> and Citigroup Inc
<C.N> plummeted for a sixth straight day, hammered by
increasing fears of a U.S. government takeover, which would
wipe out shareholders.
Citigroup plunged below $2 a share as it fell about 20
percent, and Bank of America shed about 14 percent.
European shares plunged, with the FTSEurofirst 300 <>
index of top European shares falling at one point 3.4 percent
at 738.41 points -- its lowest level since March 2003.
Safe-haven buying lifted U.S. gold futures to a seven-month
high, putting the benchmark gold contract within reach of the
record high at $1,033.90 hit in April.
"It's a direct barometer of risk aversion reaching elevated
levels," said Michael Woolfolk, senior currency strategist at
Bank of New York-Mellon in New York.
Some cautioned about the surge in gold prices.
"People are buying gold for emotional reasons and on
worries about bank nationalization in a reactionary move. There
are certainly smart people who are buying it and there were a
lot of smart people buying oil at $140 too," said Lawrence
Glazer, managing partner at Mayflower Advisors in Boston.
Spot gold prices <XAU=> rose $16.45 to $990.30 an ounce.
The dollar was up against a basket of major currencies,
with the U.S. Dollar Index <.DXY> up 0.29 percent at 87.695.
Against the yen, the dollar <JPY=> was unchanged at 94.28
and the euro <EUR=> was down 0.19 percent at $1.2638.
The greenback has benefited from extreme risk aversion in
recent months as investors sought relative safety in
dollar-denominated assets such as U.S. Treasuries.
U.S. light sweet crude oil <CLc1> fell 3.27 percent to
$38.19 a barrel.
The benchmark 10-year U.S. Treasury note <US10YT=RR> was up
23/32 in price to yield 2.77 percent. The 2-year U.S. Treasury
note <US2YT=RR> was up 2/32 in price yield 0.94 percent.
(Reporting by Charles Mikolajczak, Chris Reese, Wanfeng Zhou
and Nick Olivari in New York, Lucia Mutikani in Washington,
George Matlock in London and Peter Starck in Frankfurt; Editing
by Tom Hals)
