* Global equities mostly fall as banking fears weigh
* U.S. govt debt slides on prospect of huge new supply
* Crude oil rises on expectations of further OPEC cuts
(Recasts with U.S. markets, changes dateline; previous
LONDON)
By Herbert Lash
NEW YORK, March 9 (Reuters) - Fears of a global recession
and persistent concerns about the banking sector lifted the
U.S. dollar on Monday as global stocks mostly faltered and oil
prices shot higher on expectations of another OPEC output cut.
Government debt prices fell as U.S Treasuries retreated on
the prospect of $63 billion in new supply this week and
shorter-dated euro zone bonds slipped ahead of 8 billion euros
worth of two-year paper from Germany on Wednesday.
Crude oil rose above $47 a barrel at one point after
renewed buying on speculation the Organization of Petroleum
Exporting Countries may cut production again at its meeting on
Sunday in Vienna.
Equity markets in Europe and the United States were choppy
as higher energy prices pulled up oil shares while U.S. bank
shares rose on optimism that Washington will provide more
clarity on government plans to shore up the U.S. banking
system.
U.S. Federal Reserve Chairman Ben Bernanke was attending a
meeting on the economy with President Barack Obama, the White
House said. []
But in Europe, financials took the most points off the
FTSEurofirst 300 <> index of top European shares as
investors continued to flee the financial sector following news
of further government stake-building, fanning worries about the
stability of Britain's banks.
Growing fears about the ailing U.S. automakers and banking
drove interbank U.S. dollar borrowing costs up.
In Asia, Japan's Nikkei average <> closed at a 26-year
low, finishing down 1.2 percent, and other Asian markets
slipped on worries about the fate of General Motors <GM.N> and
U.S. banks.
"The dollar seems to be the only safe haven left right now,
with both the yen and Swiss franc under pressure," said Robert
Blake, senior currency strategist at State Street in Boston.
"We're certainly in risk aversion mode and the trade right
now is to buy dollars, which to a large extent reflects huge
repatriation flows to the United States."
Currencies have tracked equity markets' performance over
the last few weeks, with the dollar tending to benefit when
stocks fall as investors seek shelter amid fears of a collapse
of banking systems worldwide.
The dollar was up against a basket of major trading-partner
currencies, with the U.S. Dollar Index <.DXY> up 0.53 percent.
The euro <EUR=> fell 0.12 percent at $1.2625, while against
the yen, the dollar <JPY=> rose 0.50 percent at 98.86.
With the outlook so dim, Barclays cut its year-end target
for the S&P 500 to 760, saying the probability of the benchmark
U.S. stock index hitting an initial 875 was much lower now.
After 1 p.m., the Dow Jones industrial average <> was
down 62.76 points, or 0.95 percent, at 6,564.18. The Standard &
Poor's 500 Index <.SPX> was down 4.35 points, or 0.64 percent,
at 679.03. The Nasdaq Composite Index <> was down 18.56
points, or 1.43 percent, at 1,275.29.
The biggest drag on the Dow was Merck & Co Inc <MRK.N>
after its proposed $41 billion takeover of Schering-Plough
<SGP.N> raised concerns about the depth and breadth of the
recession as it hurts such defensive sectors as drugmakers,
analysts said.
"This deal was done in a declining environment for both
companies," said Arthur Hogan, chief market analyst at
Jefferies & Co in Boston.
The FTSEurofirst 300 <> index of top European shares
closed down 0.7 percent at 657.30 points.
The benchmark 10-year U.S. Treasury note <US10YT=RR> fell
6/32 in price to yield 2.90 percent. The 2-year U.S. Treasury
note <US2YT=RR> fell 3/32 in price to yield 0.99 percent.
U.S. light sweet crude oil <CLc1> rose 94 cents to $46.46 a
barrel.
OPEC Secretary-General Abdullah al-Badri said the 12-member
producer group would consider reducing output again at its
meeting on Sunday as it tries to counter downward pressure on
oil prices from falling demand.
"All options are on the table," he told reporters in Qatar
when asked if OPEC, which pumps more than one-third of the
world's oil, would announce another reduction in supply at its
meeting in Vienna. []
Spot gold prices <XAU=> fell $18.90 to $917.65 an ounce.
(Reporting by Rodrigo Campos, Gertrude Chavez-Dreyfuss, Pedro
Nicolaci da Costa in New York and Atul Prakash, Emelia
Sithole-Matarise in London; Writing by by Herbert Lash; Editing
by Leslie Adler)
