(Updates with U.S. markets, changes dateline to New York,
byline)
By Burton Frierson
NEW YORK, May 20 (Reuters) - Global stocks tumbled on
Tuesday on heightened fears of inflation as crude oil
approached $130 a barrel and producer price data showed rising
wholesale price pressures on both sides of the Atlantic.
European stocks posted their worst one-day drop in two
months, while in U.S. markets the Dow industrials slumped
almost 200 points as slack earnings from leading retailers
suggested weakening consumer spending.
Oil rose to a record high of $129.60 <CLc1> a barrel in New
York as investment banks and influential U.S. oil investor T.
Boone Pickens gave bullish price forecasts. Pickens said he
sees oil prices reaching $150 a barrel this year.
Underlying U.S. producer prices in April saw their biggest
annual gain since December 1991, and in Germany, Europe's
largest economy, producer price inflation accelerated to a
20-month high.
The rise in oil, combined with the producer price reports,
suggested that soaring commodities would become embedded in
companies' costs.
The dollar fell and government bond prices gained as
investors bet the economy would crack when companies are forced
to settle for slimmer profit margins or to pass on their rising
costs to increasingly hard-pressed consumers.
"It is definitely negative for equities," said Carl Lantz,
U.S. interest rate strategist at Credit Suisse in New York
"The two sides of the argument are commodity prices are
going to the moon, inflation is going to go up. The other side
is the consumer is so weak you can't pass on any costs."
The Dow Jones industrial average <> was down 180.02
points, or 1.38 percent, at 12,848.14. The Standard & Poor's
500 Index <.SPX> fell 11.83 points, or 0.83 percent, to
1,414.80. The Nasdaq Composite Index <> was down 26.92
points, or 1.07 percent, at 2,489.17.
Slack earnings from discount retailer Target Corp <TGT.N>
and home improvement chain Home Depot Inc <HD.N> suggested
weakening consumer spending. Shares of Home Depot fell 5.8
percent to $27.21, while shares of Target lost 0.8 percent to
$54.47
Shares of banks, including JPMorgan Chase & Co <JPM.N>,
also dropped after an influential analyst warned that the
credit crisis was far from over and could extend beyond next
year.
Meredith Whitney, a U.S. banking analyst at Oppenheimer &
Co, said the credit crisis is likely to extend well into next
year and beyond, resulting in three years of multibillion
dollar revenue declines for banks. For details, see
[].
JPMorgan shares lost 4.3 percent to $44.01.
In Europe, mining stocks and banks were the biggest
decliners. The FTSEurofirst 300 index <> of top European
shares fell 2.01 percent to a close of 1,350.54 points, making
it the worst one-day fall since March 17, when the index hit a
two-and-a-half-year year low.
Mining stock losses were led by BHP Billiton <BLT.L> and
Rio Tinto <RIO.L>, which fell 6.9 and 7.9 percent,
respectively. These declines come just days after shares in
both companies hit record highs.
Among banks HSBC <HSBA.L> lost 2.3 percent, Banco Santander
<SAN.MC> fell 1.4 percent, BNP Paribas <BNPP.PA> fell 1.8
percent and Credit Suisse <CSGN.VX> lost 2.5 percent.
In the U.S. government bond market, which abhors inflation
but usually gains on weak economic conditions, the benchmark
10-year Treasury note <US10YT=RR> rose 2/32 in price while its
yield, which moves inversely to its price, eased to 3.82
percent from 3.83 percent late Monday.
The declining fortunes of stocks also helped bonds, the
market's preferred safe haven in difficult financial times.
"Stocks took the PPI negatively, so that gave bonds a
little bit of a lift," said John Spinello, chief fixed-income
technical strategist at Jefferies & Co in New York.
In Japan's, Tokyo's Nikkei stock average fared little
better, slipping 0.77 percent, or 109.52 points, to finish at
14,160.09.
In currencies, the dollar fell against a basket of major
trading-partner currencies, with the U.S. Dollar Index <.DXY>
last down 0.86 percent at 72.397 from a previous session close
of 73.027.
The euro <EUR=> was up 0.99 percent at $1.567 from a
previous session close of $1.5517. Against the Japanese yen,
the dollar <JPY=> was down 0.58 percent at 103.74 from a
previous session close of 104.34.
The dollar's weakness and inflation worries helped gold
<XAU=>, which rose $17.55, or 1.94 percent, to $921.50.
Overall in commodities, the Reuters/Jefferies CRB Index <.CRB>
was up 4.45 points, or 1.05 percent, at 427.67.
(Editing by Leslie Adler)
