* Global stocks slide on U.S. government, Citigroup deal
* US dollar, government debt, gold rise on safe haven bids
* Oil dips 5 pct on U.S. GDP report, after week's big rise
(Recasts with U.S. markets, changes dateline; previous
LONDON)
By Herbert Lash
NEW YORK, Feb 27 (Reuters) - Global stocks fell sharply on
Friday after the U.S. government said it will take a large
stake in Citigroup <C.N>, sowing more uncertainty over the fate
of major banks and sending investors to the safety of bonds,
gold and the dollar.
The U.S. dollar rose broadly, gold extended gains and
European stocks fell further when the government announced
before U.S. markets opened that it would boost its stake in
Citigroup to as much as 36 percent. For details see
[]
Investors worried other banks might see similar action as
Washington struggles to stabilize U.S. banks. But the Citigroup
move, one of the most dramatic efforts to prop up ailing banks,
pushed the benchmark S&P 500 to lows last seen April 1997.
The government will swap up to $25 billion of its preferred
shares into common stock. Citigroup will stop paying dividends
on its preferred and common stock, and promised to shake up its
board of directors, after
"It's not good for shareholders, the news this morning, and
that is driving bond prices higher," said Thomas di Galoma,
head of U.S. Treasury trading at Jefferies & Co. in New York.
Before 10 a.m. New York time, the Dow Jones industrial
average <> fell 108.40 points, or 1.51 percent, at
7,073.68. The Standard & Poor's 500 Index <.SPX> slid 13.74
points, or 1.83 percent, at 739.09. The Nasdaq Composite Index
<> declined 5.29 points, or 0.38 percent, at 1,386.18.
The FTSEurofirst 300 <> index of top European shares
was down 2.5 percent at 714.15 points.
The benchmark 10-year U.S. Treasury note <US10YT=RR> rose
12/32 in price to yield 2.95 percent.
The dollar gained against a basket of major currencies,
with the U.S. Dollar Index <.DXY> up 0.55 percent at 88.321.
The euro <EUR=> fell 0.70 percent at $1.2641, while against
the yen, the dollar <JPY=> was off 0.73 percent at 97.67.
Oil fell more than $2, halting three straight days of
gains, but otherwise remaining on course to end the month up 5
percent from January, its first such gain since June.
Oil fell on data that showed the U.S. economy contracted
more sharply in the fourth quarter than initially expected,
falling at an annual rate of 6.2 percent, the deepest slide
since December 1982.
U.S. light sweet crude oil <CLc1> fell $2.27 to $42.95 a
barrel,
Spot gold prices <XAU=> rose $9.50 to $954.00 an ounce.
(Reporting by Ellen Freilich, Nick Olivari in New York and
Chris Baldwin and Jan Harvey in London; writing by Herbert
Lash)
