* Wall Street falls on economic worries, sliding energy
* Dollar rises vs euro as high-yielding currencies fall
* U.S., euro zone government debt perks up as stocks fall
* Oil falls below $67 a barrel on strong dollar, equities
(Updates with U.S. markets activity; changes dateline,
previous LONDON)
By Herbert Lash
NEW YORK, June 22 (Reuters) - U.S. and European stocks fell
sharply while oil prices skidded on Monday as questions about
the strength of a global economic recovery, highlighted by a
gloomy World Bank report, weighed on market sentiment.
The U.S. dollar rose against the euro on concerns over the
euro zone's economic and fiscal outlook, while higher-yielding
currencies slipped on worries about global growth prospects.
Copper tumbled 4 percent to a three-week low, weighed by
demand worries, and gold hit its lowest level since mid-May as
the stronger dollar helped weaken other commodity prices.
Longer-dated U.S. and euro zone government debt, meanwhile,
rose as weak equity markets on both sides of the Atlantic
enhanced the allure of safe-haven investments.
Oil dropped 4 percent to below $67 a barrel as the dollar
and weaker equities outweighed concerns about attacks on the
oil industry in top African exporter Nigeria.
The World Bank warned that prospects for the global economy
remained "unusually uncertain" despite signs of improvement,
and cut its 2009 growth forecasts for most economies to a
contraction of 2.9 percent from 1.7 percent decline in March.
[]
"People were becoming perhaps a bit too complacent that
most of the difficulties with the financial crisis were behind
us. I see some cautious forces here and there," said Luc Van
Hecka, chief economist at KBC Securities.
Worries that a recovery could be tepid have wilted the
optimism that drove the benchmark Standard & Poor's 500 Index
<.SPX> up by as much as 40 percent from a 12-year low in
March.
Major U.S. oil companies Exxon Mobil Corp <XOM.N> and
Chevron Corp <CVX.N> were the biggest drags on the Dow as crude
oil <CLc1> fell below $67 a barrel. Exxon fell 2.8 percent and
Chevron 3 percent.
"While the worst might be over, it doesn't mean we're off
to strong growth in any of the major economies globally," said
Alan Lancz, president of Alan B. Lancz & Associates Inc in
Toledo, Ohio.
Sounding a similar note to the World Bank's forecast, the
head of the Organisation for Economic Development and
Cooperation said major economies will contract through 2009.
"We see a very difficult 2009," Angel Gurria, head of the
30-nation group, told Reuters television in Paris.
"Unemployment problems are going to continue to linger."
[].
At 1 p.m., the Dow Jones industrial average <> was down
171.10 points, or 2.00 percent, at 8,368.63. The S&P 500 Index
<.SPX> was down 23.84 points, or 2.59 percent, at 897.39. The
Nasdaq Composite Index <> was down 55.27 points, or 3.02
percent, at 1,772.20.
The FTSEurofirst 300 <> index of top European shares
closed 2.8 percent lower at 837.22 points -- the lowest closing
level since mid-May. The index has jumped about 30 percent
since touching a lifetime low in early March.
The euro came under broad pressure and dropped near $1.38
after a closely watched business climate survey in Germany
painted a mixed picture. The euro <EUR=> was down 0.60 percent
at $1.3857 against the dollar.
Investors awaited the U.S. Federal Reserve's policy-setting
Open Market Committee meeting on Tuesday and Wednesday when
they expect the FOMC to express a slightly brighter economic
view. They are also watching whether policymakers address a
recent rise in Treasury debt yields.
"We're seeing the euro lower across the board and I think
that's largely the result of the mixed Ifo data overnight (in
Germany) as well as ongoing position squaring ahead of this
week's FOMC meeting," said Omer Esiner, senior currency analyst
at Travelex Global Business Payments in Washington.
The dollar was higher against a basket of major currencies,
with the U.S. Dollar Index <.DXY> up 0.62 percent at 80.834.
Against the yen, the dollar <JPY=> was off 0.32 percent at
95.95.
As equity markets fell, investors sought out less risky
assets. Ten-year Bund yields <EU10YT=RR> fell to a month low of
3.439 percent, while the price of U.S. long bonds jumped a full
point. Bonds yields and prices move in opposite directions.
The benchmark 10-year U.S. Treasury note <US10YT=RR> was up
17/32 in price to yield 3.71 percent. The 2-year U.S. Treasury
note <US2YT=RR> was up 4/32 in price to yield 1.14 percent.
Oil fell. Nigeria's main militant group said on Sunday it
had attacked three oil installations belonging to Royal Dutch
Shell <RDSa.L> in the Niger Delta, widening a month-old
offensive against Africa's biggest energy industry.
U.S. light sweet crude oil <CLc1> fell $2.83 to $66.72 a
barrel.
Spot gold prices <XAU=> fell $13.30 to $920.00 an ounce.
Other commodity prices also fell. Benchmark copper <MCU3>
on the London Metal Exchange traded at $4,765 a tonne, down
from $5,025 on Friday.
"There is disillusionment over the green shoots recovery
and there is a feeling generally that prices have overrun
fundamentals," said Robin Bhar, an analyst at Calyon.
The Reuters/Jefferies CRB Index <.CRB> was down 1.86
percent at 248.09.
The MSCI index <.MIAPJ0000PUS> of Asia Pacific stocks
outside Japan rose 1 percent, while Japan's Nikkei share
average <> finished 0.4 percent higher.
(Reporting by Leah Schnurr, Wanfeng Zhou, Burton Frierson in
New York; Atul Prakash, Kirsten Donovan, Alex Lawler, Sharon
Lindores, Michael Taylor and Maytaal Angel in London; writing
by Herbert Lash; Editing by Kenneth Barry)
