* MSCI world equity index slips as stocks turn south
* Index set for biggest quarterly gain since 1988 launch
* Oil slides but crude set for biggest gain in 19 years
* Declining U.S. consumer confidence overshadows optimism
(Updates with U.S. markets activity; changes dateline,
previous LONDON)
By Herbert Lash
NEW YORK, June 30 (Reuters) - Global stocks fell on Tuesday
after sliding U.S. consumer confidence cast doubts about the
strength of a recovery that has put MSCI's world equity index
on course for its best quarterly gain since its 1988
inception.
In a sign the worst of the credit crisis and world
recession may be passing, crude prices were set to post their
strongest quarter in 19 years, despite a 3 percent slide that
was sparked by a weaker dollar and the U.S. confidence data.
The Conference Board's index of consumer attitudes fell in
June to 49.3 from a downwardly revised 54.8 in May, helping
European stock markets to lose gains and halt an early sell-off
in the U.S. currency. The data also pushed U.S. stocks lower.
Investors, however, have taken heart in recent data that
showed a freeing up of primary bond and credit markets, a
cyclical, inventory-driven rebound in manufacturing, an easing
of the housing market slump and a tepid rebound in business and
consumer confidence.
Authorities have gained traction against the downturn via
extraordinary monetary policies, where official interest rates
are near zero and long-term borrowing rates have been capped by
so-called quantitative easing.
But investors also have questioned whether the "green
shoots" that Chairman Ben Bernanke of the Federal Reserve has
used to describe an economy on the mend are actually
flourishing.
The confidence data underscored an economy still in trouble
and cast a shadow over earlier reports that suggested the
downward spiral may be moderating. The U.S. equity market
sell-off was broad, hitting all 10 of the S&P's sectors.
The consumer confidence data dampened sentiment, said Kevin
Kruszenski, head of listed trading at KeyBanc Capital Markets
in Cleveland.
"Everybody is trying to connect the dots in terms of
positive economic data, or at least data that is just in
decelerating decline," Kruszenski said.
MSCI's all-country world index <.MIWD00000PUS> fell 0.87
percent, after paring gains of 0.5 percent.
David Resler, chief economist at Nomura Securities
International in New York, said prices may have been getting a
bit ahead of events in the last few days.
"This is a wake-up call for the stock market that the
economic recoveries typically move in fits and starts, and this
kind of (move) in consumer confidence is a revelation that it
is not all clear sailing from here," Resler said.
At 1:27 p.m., the Dow Jones industrial average <> was
down 109.28 points, or 1.28 percent, at 8,420.10. The Standard
& Poor's 500 Index <.SPX> was down 11.59 points, or 1.25
percent, at 915.64. The Nasdaq Composite Index <> was down
14.80 points, or 0.80 percent, at 1,829.26.
Still, the Standard & Poor's 500 Index, a widely followed
equity index, was set to close its first positive quarter in
almost two years even as the rally has stalled recently.
"We're at that stage now, where bad news will make a bigger
dent than decent news," said Howard Wheeldon, a strategist at
BGC Partners in London. "And it doesn't take much. Volumes are
so low today, they're just tiny."
For the day, European shares fell, with the FTSEurofirst
300 <> index of top European shares down 1.1 percent to
close at 850.17. Over the second quarter the index gained 15.9
percent.
The simultaneous end to the month, quarter and half-year
point led to increased volatility in foreign exchange trading,
exacerbating intra-day moves in currencies.
Gold fell to a one-week low, dropping sharply as the dollar
strengthened broadly and crude oil prices tumbled, reducing the
metal's appeal as an inflation hedge.
Copper reversed earlier gains to turn negative, weighed
down by a firmer dollar and growing perceptions that prices had
risen too far and that demand prospects remained poor.
U.S. Treasury debt prices fell slightly as traders booked
profits on recent price gains, while euro zone government bonds
eased with Bund futures retreating from a six-week high.
The benchmark 10-year U.S. Treasury note <US10YT=RR> was
unchanged in price to yield 3.48 percent. The 2-year U.S.
Treasury note <US2YT=RR> was down 1/32 in price to yield at
1.11 percent.
The dollar rose against a basket of major currencies, with
the U.S. Dollar Index <.DXY> up 0.40 percent at 80.153.
Against the yen, the dollar <JPY=> was up 0.20 percent at
96.32.
The euro <EUR=> was down 0.28 percent at $1.4036.
U.S. light sweet crude oil <CLc1> fell $2.18 at $69.31 a
barrel.
Spot gold prices <XAU=> fell $9.15 to $927.90 an ounce.
Asian stocks rose on the last day of a torrid quarter, as
investors added to trades based on an economic rebound. Japan's
Nikkei share average <> finished 1.8 percent higher.
(Reporting by Rodrigo Campos, Edward Krudy, Vivianne Rodrigues
and Chris Reese in New York; Brian Gorman, Ian Chua, Joe Brock
and Nick Vinocur in London; writing by Herbert Lash)
(Editing by Theodore d'Afflisio)
