* Risk assets dumped as recession worries mount
* Global stocks fall 1 pct after a two-day rally fizzles
* Gold, bonds, yen rise, oil hovers near one-year low
By Ian Chua
LONDON, Oct 15 (Reuters) - Signs of renewed risk aversion
surfaced on Wednesday with stocks pressured and gold rising as
investors fret the global economy will not escape a recession
even after bank bailouts, which have taken the edge off money
market stress.
Oil prices held near a one-year trough below $80 set on
Friday, while the yen and government bonds climbed as fears
about an imminent financial meltdown gave way to economic
worries after trillions of dollars were pledged to boost the
banking system.
"The panic may have been removed from the market, and
financial system meltdown may have be averted by the compendium
of measures, but the outlook for earnings ... and the global
economy continues to look grim," said Daragh Maher, deputy Head
of global FX strategy at Calyon.
Fuelling those concerns was a disappointing outlook from
PepsiCo Inc <PEP.N>, especially given that soft drink- and
snack-makers are usually seen as holding up in tough economic
times.
European stocks fell in early trade, with the FTSEurofirst
300 index <> shedding 2 percent, while Germany's DAX
<> and Britain's FTSE <> both shed more than 2
percent.
MSCI's main world stock index <.MIWD00000PUS> was down about
1 percent, as the two-day rebound from a five-year low fizzled.
"After the colossal gains achieved at the start of this
week, it would seem that the hangover has kicked in and
investors have sobered to the reality that recession is here,"
said Andrew Turnbull, senior sales manager at ODL Securities.
MSCI's measure of Asian stock markets excluding Japan
<.MIAPJ0000PUS> slid 3.4 percent. Japan's Nikkei <>,
however, rose 1.1 percent after spending most of the session in
negative territory.
A recent slew of negative euro zone economic indicators
including Tuesday's data showing a bigger-than-expected fall in
German investor sentiment about the outlook for Europe's largest
economy were starting to bite.
Anyone looking for relief is likely to be disappointed with
U.S. retail sales data due later in the session expected to show
a decline for a third straight month. Forecasts centred on a 0.7
percent fall.
MONEY MARKETS HEALING
Still, measures by governments and central banks aimed at
restoring confidence between banks appeared to be helping to
kick-start the healing process in money markets, which had
literally gummed up after the collapse of Lehman Brothers last
month.
Overnight dollar interbank rates were indicated at 1-1.5
percent, slightly below early Tuesday's level, although
three-month dollar rates remained around early Tuesday levels,
indicated in wider 3.5-5.4 percent range.
"The rescue packages around the world have laid the
foundation for market confidence to return. However, experience
has shown that confidence recovers only slowly," said
Commerzbank analyst Antje Praefcke.
The yen benefited as investors turned risk averse. The
dollar fell 0.9 percent to 101.29 yen <JPY=>, while the euro
lost 1.2 percent to 137.70 yen <EURJPY=>.
Weakness in equity markets helped fuel demand for government
bonds, driving yields lower. The euro zone 10-year bond yield
<EU10YT=RR> slipped 3.5 basis points to 4.085 percent, while the
U.S. 10-year yield <US10YT=RR> eased 7.2 basis points to 4.013
percent.
Meanwhile, U.S. crude <CLc1> was little changed at $78.70
but not far off the one-year low of $77.09 a barrel plumbed on
Friday, weighed by worries that a global recession would hurt
demand.
Demand for gold, however, was firm, helping push the
precious metal up more than 1 percent to $846.
(Additional reporting by Atul Prakash; Editing by Victoria
Main)
