* Global stocks slip on nagging worries about economy
* Oil falls to close to $60 a barrel on recovery doubts
* Bonds gain on equity sell-off, strong demand at auction
* Yen climbs broadly as carry trade unwinds
(Adds close of U.S. markets)
By Herbert Lash
NEW YORK, July 8 (Reuters) - Oil slid more than 4 percent
on Wednesday and the yen soared broadly in its biggest jump in
months as new signs and related news of tepid economic activity
spurred risk aversion and the appeal of government debt.
Strong demand for the U.S. Treasury's latest sale of
10-year notes offered fresh evidence of the desire by both
foreign and domestic investors for U.S. debt in an uncertain
economic climate that is hanging like a pall over markets.
Concerns about a recovery also could be seen with investors
questioning whether China will be a driver of global growth
considering the eruption of Chinese ethnic unrest.
U.S. equities pared most of their losses late in the
session as investors hoped that corporate results would top
estimates as the quarterly earnings season kicked off. Aluminum
producer Alcoa Inc <AA.N>, the first Dow component to report
second quarter earnings, said after the market close that it
had posted its third consecutive quarterly loss.
Sentiment was still broadly negative, with declining issues
outpacing advancing issues by almost 2 to 1 on the New York
Stock Exchange.
Global stocks declined. MSCI's all-country world index
<.MIWD00000PUS> fell almost 1 percent.
The Dow Jones industrial average <> closed up 14.81
points, or 0.18 percent, at 8,178.41. The Standard & Poor's 500
Index <.SPX> fell 1.47 points, or 0.17 percent, at 879.56. The
Nasdaq Composite Index <> was up 1.00 points, or 0.06
percent, at 1,747.17.
Gains in the yen accelerated after it broke through key
technical levels, traders said, leading investors to reverse
trades where they had borrowed in yen to buy higher-yielding
currencies.
"It's a risk-driven market and risk is in the process of
being unwound," said Brian Dolan, chief currency strategist at
Forex.com in Bedminster, New Jersey.
The euro fell more than 3 percent to a low of 127.05 yen
<EURJPY=R>, its lowest since May, according to Reuters data.
Against the dollar, the euro <EUR=> was down 0.35 percent at
$1.3871.
It was the biggest one-day move in the euro against the yen
since November and the biggest one-day move by the dollar
against the yen since March.
The dollar fell against a basket of major currencies, with
the U.S. Dollar Index <.DXY> off 0.03 percent at 80.681.
Against the yen, the dollar <JPY=> was down 2.31 percent at
92.67.
The drop in crude prices triggered a sell-off in other
commodities, with tin <MSN3> and nickel <MNI3> falling more
than 5 percent each in London.
U.S. crude <CLc1> settled at $60.14 a barrel, its sixth
straight day of declines and the lowest close since May 19.
London Brent crude <LCOc1> settled down at $60.43.
"Distillate stocks are showing signs that the economy has
not had any real improvements yet," said Mike Zarembski, senior
commodities analyst at optionsXpress in Chicago.
U.S. government bond prices shot up and pushed benchmark
yields to 6-1/2 week lows after the Treasury sold $19 billion
of 10-year debt without the slightest hitch.
Despite oft-stated concerns about the amount of debt the
U.S. Treasury must sell to finance efforts to end a deep
recession and fund various financial rescues, risk-averse
investors beat a path to the government's latest auction.
Demand was firmer than people had expected, said David
Dietze, chief investment strategist at Point View Financial
Services in New York.
"Basically the fear trade is raising its head," Dietze
said.
Unease over the economic outlook was driven in part by an
International Monetary Fund report that said the global economy
is likely to contract 1.4 percent this year, more than the 1.3
percent decline it projected in April. []
U.S. government debt shot higher. The benchmark 10-year
U.S. Treasury note <US10YT=RR> was up 43/32 in price to yield
3.29 percent. The 2-year U.S. Treasury note <US2YT=RR> rose
3/32 in price to yield 0.91 percent.
U.S. government weekly data that showed gasoline stocks had
risen by 1.9 million barrels, more than expectations for a
600,000 barrel increase, also bolstered the view that the U.S.
economy was far from rebounding. []
Distillate stocks, including diesel, climbed 3.7 million
barrels, compared with an expected two million barrel rise, to
their highest level in nearly 25 years. []
"Oil data from the United States were very bearish today
and that reinforced the negative sentiment for industrial
commodities," said Justin Lennon, a copper analyst at Mitsui
Bussan Commodities in New York.
Copper for September delivery <HGU9> slumped 6.65 cents to
settle at $2.1590 a pound in New York, while gold futures for
August delivery <GCQ9> settled down $19.80 at $909.30 an
ounce.
European shares fell for the fifth straight session as
investors fretted over further signs that the pace of economic
recovery will not be fast. []
The FTSEurofirst 300 <> index of top European shares
closed 1.1 percent lower at 817.12 points. The FTSE 100 <>
closed down 46.77 points at 4140.23, its third day of losses.
The MSCI index of Asia-Pacific shares outside Japan
<.MIAPJ0000PUS> dropped 1.2 percent to a two-week low, while
Japan's Nikkei <> slid for a sixth straight trading day,
off 2.4 percent.
(Reporting by Rodrigo Campos, Richard Leong, Ellen Freilich
and Nick Olivari in New York; Martina Fuchs, Christopher
Johnson, David Brett, Barbara Lewis, Michael Taylor and Kylie
MacLellan in London; writing by Herbert Lash, Editing by Chizu
Nomiyama)
