* Global stocks mostly sag as bailout debate continues
* U.S. oil slips, fuel inventories drop on Ike disruptions
* U.S. government debt advances on bailout plan worries
* Dollar slips against euro and yen
(Adds close of U.S. markets)
By Herbert Lash
NEW YORK, Sept 24 (Reuters) - Crude oil and global stocks
slid on Wednesday as doubts about the final shape of the U.S.
government's $700 billion plan to forestall a wider economic
crisis weighed on investors.
Concerns over how Congress will shape the planned rescue of
troubled banks eclipsed optimism generated by billionaire
Warren Buffett's $5 billion investment in Goldman Sachs <GS.N>
and pushed investors into gold and government debt.
Shares rose overnight in Asia on the Buffett news but
European shares fell as investors worried about the bailout
plan. U.S. stocks see-sawed throughout the day to end mostly
lower for a third day. The Nasdaq rose slightly on the hope
business spending on technology will rise when the bailout is
approved.
Investors latched onto cash and low-risk assets, sending
one-month yields on U.S. Treasury bills to below zero at one
point. Bullion holdings in the SPDR Gold Trust <GLD.P>, the
world's largest gold-backed exchange-traded fund, rose 2
percent to a record 724.94 tonnes on buying momentum.
Gains in safe-haven assets and equity declines were capped
by cautious optimism about Buffett's bet on Goldman, which was
seen as a vote of confidence in the banking sector.
Other signs of risk appetite could be seen. Earlier, the
yen fell against the dollar as traders sold the low-yielding
Japanese currency to finance riskier investments.
Treasury Secretary Henry Paulson and Federal Reserve
Chairman Ben Bernanke testified for a second day to Congress.
Bernanke urged immediate approval of the bailout to thwart
"serious consequences" for the U.S. economy and financial
markets.
While many investors said they believed the proposal would
be passed, the devil was in the details, and with politicians
playing a large role in deliberations angst was widespread.
"My gut feeling is that the proposal will get passed but
this is an election year and the politicians are going to milk
this. There is certainly an underlying reluctance to give this
$700 billion blank check to Paulson," said Win Thin, a senior
currency strategist at Brown Brothers Harriman in New York.
If Congress doesn't act quickly, investors fear banks won't
resume lending, risking more harm to the economy and the
outlook for corporate profits.
Worries about the passage of the bailout intensified safety
bids for short-term debt as well as longer-dated bonds. Efforts
to repair the banking sector helped lift the price of euro zone
debt, as did a slump in German business sentiment.
"There's a tremendous amount of anxiety whether this bill
will get passed," said Thomas di Galoma, head of U.S.
government bonds at Jefferies & Co. in New York.
The Dow Jones industrial average <> closed down 29.00
points, or 0.27 percent, at 10,825.17. The Standard & Poor's
500 Index <.SPX> fell 2.23 points, or 0.19 percent, at
1,185.99. The Nasdaq Composite Index <> was up 2.35
points, or 0.11 percent, at 2,155.68.
Shares of Goldman Sachs closed up 6.4 percent at $133.00,
after the Buffett investment was announced late on Monday.
Berkshire Hathaway <BRKa.N>, Buffett's holding company, added
3.5 percent.
But shares of Citigroup <C.N> were a top drag on the Dow
and S&P, falling 5.2 percent to $18.96.
European stocks ended lower. The FTSEurofirst 300 <>
index of top European shares closed 0.63 percent lower at
1,101.60 points, falling for the third consecutive session.
Euro zone government debt rose as weakening business morale
in Germany, France and Italy offered more evidence that the
region is sinking into recession, and could lead the European
Central Bank to cut interest rates in the future.
U.S. government debt also rose. A big thrust into T-bills
sent one-month rates <US1MT=RR> a touch below zero percent
overnight and three-month rates <US3MT=RR> below 0.50 percent.
"A lot of people are very, very, very risk averse right
now," said Ted Ake, executive director and head of bond trading
with Mizuho Securities USA in New York. "Money market funds are
being inundated with (investors making) the case that they only
want to be in Treasuries.
"Eventually that will subside," he added.
The benchmark 10-year U.S. Treasury note <US10YT=RR> was
little changed, yielding 3.80 percent. The 30-year U.S.
Treasury bond <US30YT=RR> fell 7/32 to yield 4.40 percent.
The euro <EUR=> rose 0.14 percent at $1.4623, and against
the yen the dollar <JPY=> fell 0.55 percent.
But the dollar rose against major currencies, with the U.S.
Dollar Index <.DXY> up 0.23 percent.
Oil dipped as concerns over the U.S. economy and sliding
fuel demand outweighed hurricane-related supply disruptions in
the Gulf of Mexico that have pushed U.S. gasoline stockpiles to
their lowest level since 1967.
U.S. crude <CLc1> fell 88 cents to settle at $105.73 per
barrel, and London Brent crude <LCOc1> fell 63 cents to $102.45
a barrel.
December gold <GCZ8> settled up $3.80 at $895.00 an ounce
in New York.
Asian financial shares rose after Buffett's investment in
Goldman. Japan's Nikkei <> gained 0.2 percent, while
MSCI's index of Asia-Pacific stocks outside Japan
<.MIAPJ0000PUS> was up 0.15 percent at 16:45 GMT.
(Reporting by Ellis Mnyandu, Steven C. Johnson, Richard Leong,
Gertrude Chavez-Dreyfuss and Nick Olivari in New York; Jane
Merriman, Matthew Robinson and Naomi Tajitsu in London and
Blaise Robinson in Paris; Writing by Herbert Lash; Editing by
Leslie Adler)
