* Global stocks slump as credit market strains persist
* Investor uncertainty spurs safety bid in government debt
* Euro nears 13-month low vs dollar after Trichet comments
* Oil falls; focus shifts to slower demand, rising supply
* Gold dips 4 percent, silver 12 percent, platinum 5 pct
(Recasts with U.S. markets, adds byline; changes dateline;
previous LONDON)
By Herbert Lash
NEW YORK, Oct 2 (Reuters) - A new batch of weak U.S. data
drove fears of slower global growth, driving stocks around the
world and oil sharply lower on Thursday, even as the U.S.
Congress worked toward passing a revised bill to rescue the
ailing financial sector.
U.S. and euro zone government debt rose in a renewed
safe-haven rally as reports on jobless claims and factory
activity led economists to say the United States was in
recession.
The dollar rose to its highest level in over a year against
the euro after European Central Bank President Jean-Claude
Trichet said inflation risks in the euro zone have eased,
opening the door to the ECB's first rate cut in five years.
Investor confidence ebbed and commodity prices tumbled amid
the bleak economic picture painted by the latest U.S. data,
despite the U.S. Senate's approval late on Wednesday of a
revised $700 billion plan to bail out banks holding bad debt.
The deteriorating economic outlook led investors to dump
gold and other precious metals as the dollar firmed. Oil fell
more than $4 to settle just under $94 a barrel.
The Senate's approval of the rescue plan initially
reassured European stock markets, but U.S. stocks fell sharply
on the economy and on jitters over passage of the bailout, with
the broad S&P index closing down 3 percent.
The grim U.S. news dragged down stock markets throughout
Latin America, as well as Europe, led by a more than 7 percent
drop in Brazil's blue-chip Bovespa index.
The U.S. government reported the number of people filing
for new jobless benefit claims rose to a seven-year high in the
latest week and factory orders showed a steeper-than-expected
drop in August.
The data shows how much damage the credit crisis has cast
on the U.S. and global economies, said Alan Lancz, president of
Alan B. Lancz & Associates Inc in Toledo, Ohio.
"It's almost a perfect storm and it's starting to hit
home," Lancz said.
The Dow Jones industrial average <> closed down 348.62
points, or 3.22 percent, at 10,482.45. The Standard & Poor's
500 Index <.SPX> shed 46.81 points, or 4.03 percent, at
1,114.25. The Nasdaq Composite Index <> lost 92.68 points,
or 4.48 percent, at 1,976.72.
Economic bellwethers were hard hit on Wall Street.
General Electric <GE.N> slid 9.6 percent to $22.15 after
the company, seeking to raise cash, said it priced a share
offering below the stock's closing price on Wednesday.
Insurance stocks, led by Hartford Financial <HIG.N>,
Principal Financial <PFG.N> and MetLife <MET.N>, fell after
Senate Majority Leader Harry Reid raised the question of
whether an unnamed, well-known insurer could be in financial
trouble. Hartford shares fell 32 percent, Metlife slid 14.9
percent, and Principal Financial shed 16.3 percent.
European stocks fell on the U.S. economic data, knocking
down mining and industrial stocks.
ArcelorMittal <MTP.PA> sank 9.3 percent, Rio Tinto <RIO.L>
dropped 7.9 percent and Siemens <SIEGn.DE> lost 4.6 percent.
The FTSEurofirst 300 <> index of top European shares
closed 1.3 percent lower at 1,058.81 points, after being ahead
earlier in the session. The index is down 30 percent in 2008.
"The U.S. is tipping into recession," said Marc Touati,
economist at Global Equities in Paris, who held out a bit of
hope that all was not lost. "But we're getting to the end of
the tunnel on the credit front, and if the rescue plan goes
through, it will certainly help the economy."
Money market stress eased in Europe but lending rates for
overnight loans among banks remained above central bank
targets, reflecting a strong aversion to counterparty risk and
how economic strains are making lending costlier.
The U.S. commercial paper market contracted dramatically
for a third straight week as business lending and borrowing
effectively shut down, Federal Reserve data showed Thursday.
The overnight rate for the London interbank offered rate in
dollars <USD3MDFSR=> fell more than a full point to 2.68125
percent, while euro overnight rates also eased.
But longer maturity rates jumped, with benchmark
three-month rates -- which now cover the year-end period --
fixed higher in dollars and euros.
The benchmark 10-year U.S. Treasury note <US10YT=RR> rose
26/32 to yield 3.64 percent, while the 2-year U.S. Treasury
note <US2YT=RR> gained 11/32 to yield 1.64 percent.
Gold fell more than 4 percent as investors sold bullion to
cover losses on other markets. Silver plunged more than 12
percent in sympathy, while platinum shed over 5 percent to its
weakest level since January 2006 after U.S. carmakers reported
a fresh drop in auto sales in September on Wednesday.
December gold futures <GCZ8> settled down $43 at $844.30 an
ounce in New York.
The dollar rose against a basket of major currencies, with
the U.S. Dollar Index <.DXY> up 1.04 percent, but against the
yen, the dollar <JPY=> slipped 0.58 percent at 105.17.
The euro <EUR=> fell 1.60 percent at $1.3795.
Oil fell as turmiol in financial markets stoked concerns
about fuel demand and sent investors seeking safer havens.
U.S. crude <CLc1> settled down $4.56 at $93.97, while
London Brent <LCOc1> fell $4.77 to settle at $90.56 a barrel.
Asian stocks fell. The MSCI index of Asia-Pacific stocks
outside Japan <.MIAPJ0000PUS> fell 1.2 percent, while Tokyo's
Nikkei average <> dropped 1.9 percent to end at its lowest
close in three years.
(Reporting by Ellis Mnyandu, John Parry, Nick Olivari in New
York; Jane Merriman, Jan Harvey, Emelia Sithole-Matarise and
Kevin Plumberg in London and Blaise Robinson in Paris; Writing
by Herbert Lash; Editing by Leslie Adler)
