(Adds close of U.S. markets)
By Herbert Lash
* Fears of slower global economy hit equities
* Global jitters boost dollar; euro slides to 8-month low
* Oil slips on slowing U.S. demand, little Gustav damage
NEW YORK, Sept 3 (Reuters) - The dollar surged to an
eight-month high on Wednesday as recession fears in Europe
trimmed stocks and crude oil but added strength to the U.S.
currency.
Slowing demand in the United States and other consuming
nations weighed on oil prices, which initially fell more than
$2 a barrel before paring most losses. Signs that the U.S. oil
sector would quickly recover from Hurricane Gustav also weighed
on prices.
A rising dollar hurt energy futures, too. The U.S. currency
extended a recent bull run on growing expectations the United
States will outperform growth in Europe, where the day's data
underscored a weakening economy in the euro zone.
Fears of a global slowdown undermined sentiment and fanned
equity market losses in Asia, Europe and the Americas. The MSCI
main world equity index <.MIWD00000PUS> fell 0.84 percent.
Investors sold U.S. bellwether stocks like Intel Corp
<INTC.O> and Cisco Systems <CSCO.O> because technology is seen
as having the most exposure to the global economy.
Intel was off 4.6 percent and H-P fell 2 percent.
The extended fall in oil prices, now down nearly 30
percent since reaching an all-time high of $147.27 a barrel in
July, suggested the global economic outlook is slowing as
demand for energy ebbs.
"Global growth is still a concern, " said Brian Gendreau,
investment strategist at ING Investment Management in New York.
"Now we are seeing weakening growth in Europe and, to a lesser
extent, Japan and now even emerging markets."
Stocks have been boosted recently by the easing of oil
prices. But Gendreau said if slack demand is driving the fall
in oil prices, "that isn't necessarily good for stocks."
Shares of Corning <GLW.N>, the world's largest maker of
glass for liquid crystal televisions and computers, slid 12.6
percent after it slashed its third-quarter profit outlook.
Qualcomm's <QCOM.O> shares fell 3.7 percent after its chief
executive said on CNBC the chip maker was seeing some signs of
customers slowing their cell phones upgrades.
Intel, Corning, Qualcomm and Cisco were the biggest
contributors to the decline in the S&P 500 index.
The Dow Jones industrial average <> rose 15.96 points, or 0.14 percent, at 11,532.88. The Standard & Poor's 500 Index
<.SPX> fell 2.59 points, or 0.20 percent, at 1,274.99. The
Nasdaq Composite Index <> shed 15.51 points, or 0.66
percent, at 2,333.73.
The Dow eked out a gain, however, helped by shares of Home
Depot Inc <HD.N> after the home improvement retailers' chief
executive said the battered U.S. housing market may be nearing
an end, pushing its shares up almost 5 percent.
The shutdown of Ospraie Management's flagship hedge fund
caused the price of many commodities to slump, as investors
feared it would be the first of more commodity fund failures.
Investors have fled commodities as oil prices slid and the
dollar strengthened amid widespread anxiety about the world's
economic outlook.
The Reuters-Jefferies CRB index <.CRB> for 19 commodities
futures fell to nearly a seven-month low.
"It's a continuation of what we saw Tuesday. Crude oil is
weaker and there are fears of more commodity liquidation," said
Dan Cekander, an analyst for Newedge USA.
European stocks retreated, ending at their lowest closing
level in a week.
Data showed that falling investment and private consumption
led the economy to shrink 0.2 percent from April to June, the
first-ever quarterly contraction in the euro zone. That fueled
fears of a recession in the region.
"The economic environment remains gloomy, especially in the
euro zone where we're getting a flow of negative news. The euro
zone is suffering more from the U.S. downturn than people had
initially thought," said Romain Boscher, head of equity
management at Groupama Asset Management, in Paris.
The FTSEurofirst 300 <> index of top European shares
closed 1.5 percent lower at 1,181.90 points.
U.S. Treasury debt prices edged up, pushing benchmark
yields down near four-month lows as weaker oil prices eased
bond investors' inflation expectations.
U.S. Treasury debt prices were mixed. The benchmark 10-year
U.S. Treasury note <US10YT=RR> rose 7/32 to yield 3.71 percent.
The 30-year U.S. Treasury bond<US30YT=RR> gained 16/32 to yield
4.33 percent.
Investors awaited interest rate decisions by both the Bank
of England and the European Central Bank on Thursday.
Although the ECB is expected to keep benchmark borrowing
costs at 4.25 percent, the focus will be on President
Jean-Claude Trichet who might provide clues on the outlook for
rates.
The dollar rose slightly after earlier touching its highest
level against the euro since January.
The dollar slipped slightly late in the session against
major currencies, with the U.S. Dollar Index <.DXY> off 0.01
percent at 78.03. Against the yen, the dollar <JPY=> was down
0.42 percent at 108.18.
The euro <EUR=> fell 0.09 percent at $1.4502.
Oil fell slightly. U.S. crude <CLc1> traded down 36 cents
to settle at $109.35 a barrel by 1700 GMT, after ending on
Tuesday below its 200-day moving average, a key technical
level, for the first time since May 2007. London Brent <LCOc1>
fell 32 cents to $108.02.
U.S. gold and other precious metals maintained lower levels
into the close, pulled down by crude's drop and the dollar's
rise to January highs against the euro.
December gold futures <GCZ8> finished with $2.30 losses at
$808.20 an ounce in New York.
MSCI's index of Asia stocks outside Japan <.MIAPJ0000PUS>
was 1.5 percent lower, dragged down by resource-related stocks
in the main Hong Kong <>, Singapore <.FTSTI> and Sydney
<> indexes.
Japan's Nikkei average <> closed up 0.6 percent as the
prospect of cheaper fuel and lower inflation boosted some
stocks.
(Reporting by Sam Nelson in Chicago; Kristina Cooke, John
Parry, Vivianne Rodrigues and Carole Vaporean in New York;
Matthew Robinson, David Sheppard and Ian Chua in London and
Blaise Robinson in Paris)
(Writing by Herbert Lash)
