* U.S., European stocks slide; financial shares lead fall
* Bonds rise; financial sector fears boost safe-haven bid
* Report of trimmed IMF growth forecasts weigh on markets
* Oil rebounds after signs its rally fizzled; Iran says
OPEC on guard
(Recasts with U.S. markets, adds byline; changes dateline;
previous LONDON)
By Herbert Lash
NEW YORK, Aug 25 (Reuters) - U.S. and European stocks fell
on Monday as persistent credit and global growth concerns
slammed equities and led investors to seek the safety of
government debt on both sides of the Atlantic.
The decline U.S. assets reduced demand for the dollars to
buy them and pushed investors into investments perceived as
less risky, such as the yen and government debt.
Crude prices edged higher in thin, seesaw trade. Oil
investors made wary by a volatile dollar and an upcoming
meeting of the Organization of Petroleum Exporting Countries
Sept. 9 that will focus on a recent slide in prices.
Investors flocking to government debt pushed benchmark
yields on U.S. Treasuries to 3-month lows while bund futures in
Europe posted their biggest one-day rise in a month. Bonds
prices and yields move inversely to each other.
The dollar's intra-day gains on a better-than-expected U.S.
existing-home sales report were short lived, even though a
recovering or stabilizing U.S. housing market is seen as
critical to restoring investor confidence in the U.S. economy.
The British pound hit two-year lows against the dollar,
with stalled UK growth seen as another example of growing
economic malaise outside the United States.
Analysts said price moves were exacerbated by thin volume
due to a bank holiday in the United Kingdom and the last week
of summer for financial markets.
"Ongoing credit angst is giving us some flight-to-quality
trade, but trade is pretty thin," said Kim Rupert, managing
director of global fixed income analysis at Action Economics
LLC in San Francisco.
U.S. stocks slid almost 2 percent, erasing Friday's sharp
gains, as financial shares slid.
American International Group Inc <AIG.N> fell to a 13-year
low after
Credit Suisse cut its price target and forecast a huge
third-quarter loss for American International Group Inc
<AIG.N>, citing bigger losses from its derivatives business.
AIG shares fell 5.4 percent to a 13-year low.
Concern grew as Lehman Brothers <LEH.N> shares fell more
than 7 percent after a top South Korean regulator expressed
reservations about state-run Korea Development Bank's interest
in buying a global bank.
Further fueling concerns of possibly further fallout from
the credit crisis, bank regulators shut Columbian Bank and
Trust Co late Friday, the ninth U.S. bank to fail this year.
"Financial stocks are pretty much in the red across the
board," said Al Kugel, chief investment strategist for Atlantic
Trust in Chicago.
"They're the main determinant of the direction of the
overall market, and it's hard to make progress when they are
down," he said.
Among industrial conglomerates with big overseas exposure,
Caterpillar <CAT.N> shed 2.5 percent. The International
Monetary Fund trimmed its forecasts for 2008 and 2009 world
economic growth in a note prepared for the meeting of the Group
of 20 nations, a G20 finance official told Reuters.
Before 1 p.m., the Dow Jones industrial average <> was
down 240.43 points, or 2.07 percent, at 11,387.63. The Standard
& Poor's 500 Index <.SPX> was down 25.66 points, or 1.99
percent, at 1,266.54. The Nasdaq Composite Index <> was
down 52.02 points, or 2.15 percent, at 2,362.69.
European shares also fell on persistent financial sector
worries, with Spanish bank Santander <SAN.MC> and Dutch-Belgian
financial group Fortis <FOR.AS> both dropping 2.4 percent.
The FTSEurofirst 300 <> index of top European shares
ended 0.56 percent lower at 1,169.17 points.
Lower crude oil prices <CLc1><LCOc1> extended the previous
session's steep slide in energy majors. Royal Dutch Shell
<RDSa.AS> fell 1.8 percent and Total <TOTF.PA> 1.4 percent.
The IMF's lowered economic growth projections signaled
weaker demand and hit shares in steel maker ArcelorMittal
<MTP.PA>, down 2.2 percent, and engineering conglomerate
Siemens <SIEGn.DE>, off 1.6 percent, among European big caps.
Tension between the West and Russia over Georgia and
expectations that OPEC would trim production should crude
prices fall further helped pushed oil slightly higher.
The U.S. dollar pared some losses against the yen after
data showed U.S. existing home sales rose more-than-expected in
July.
The dollar fell against major currencies, with the U.S.
Dollar Index <.DXY> down 0.12 percent at 76.684. Against the
yen, the dollar <JPY=> fell 0.75 percent at 109.18.
The euro <EUR=> fell 0.06 percent at $1.4782.
The pound later recovered but its weakness helped the
revival of the dollar against some currencies including the
euro.
The benchmark 10-year U.S. Treasury note <US10YT=RR> rose
24/32 to yield 3.78 percent. The 30-year U.S. Treasury
bond<US30YT=RR> rose 39/32 to yield 4.39 percent.
The dollar's rally sparked a rebound in Asian stocks from a
two-year low as the drop in oil prices back below $120 a barrel
lifted shares of companies sensitive to energy prices.
U.S. light sweet crude oil <CLc1> rose 29 cents to $114.88
a barrel.
Spot gold prices <XAU=> fell 5 cents to $822.05 an ounce.
Japan's Nikkei share average <> ended up 1.7 percent, and
MSCI's Asia-Pacific ex-Japan index <.MIAJP00000PUS> rose 1.2
percent.
(Reporting by Kristina Cooke, Chris Reese, Nick Olivari and
Frank Tang in New York and Ian Chua, Alex Lawler in London and
Peter Starck in Frankfurt)
(Reporting by Herbert Lash. Editing by Richard Satran)
