* Global stocks fall on worries about financial system
* Oil prices edge higher on speculation over OPEC cuts
* US government debt slips amid skepticism on rescue plans
* Dollar gains after Bernanke urges bold economic action
(Recasts with U.S. markets, changes dateline; previous
LONDON)
By Herbert Lash
NEW YORK, March 3 (Reuters) - Global stocks slumped anew on
Tuesday and the U.S. dollar gained on persistent concerns about
the global financial system, while oil prices edged higher on
expectations OPEC will cut output to counter slowing demand.
A key European stock index fell to a lifetime closing low
since its inception in 1997 as bank stocks continued to slide.
U.S. Treasury debt prices slipped on supply concerns even
as investors remain skeptical that government plans to get bad
debts off bank balance sheets are yielding results, a sentiment
that would typically drive a safe-haven bid for government
debt.
European credit default swap spreads widened sharply in
response to the deteriorating economic climate and growing
financial industry losses.
Investors looked to U.S. Treasury Secretary Timothy
Geithner, who testified before a Congressional panel, to
provide more clarity on the government's efforts to instill
confidence in the financial system.
The price of many financial assets indicates they are
essentially insolvent, said Stephen Massocca, managing director
at Wedbush Morgan in San Francisco.
"The real question is, Will Geithner come out with what
we're going to do about the fact that there is no equity
remaining in several major American financial companies?"
Massocca said. "Until we get an answer to that we're not
probably going to get any significant rally."
Earlier, U.S. stocks had briefly rallied after U.S.
President Barack Obama said share prices are potentially a good
deal at current levels. But stocks turned lower.
After 1 p.m., the Dow Jones industrial average <> fell
29.07 points, or 0.43 percent, at 6,734.22. The Standard &
Poor's 500 Index <.SPX> was down 4.52 points, or 0.64 percent,
at 696.30. The Nasdaq Composite Index <> was down 1.15
points, or 0.09 percent, at 1,321.70.
The dollar rose against the yen and euro as Federal Reserve
Chairman Ben Bernanke called for bold government action to pull
the economy out of recession, even if it means a surge in
federal debt.
Bernanke's remarks to Congress heartened some investors who
are betting that proactive measures to fight the crisis will
help the United States become the first major economy to
recover. For details see, []
The dollar rose against a basket of major currencies, with
the U.S. Dollar Index <.DXY> up 0.02 percent at 89.044.
The euro <EUR=> fell 0.10 percent at $1.257, and against
the yen, the dollar <JPY=> was up 1.16 percent at 98.34.
In Europe, the pan-European FTSEurofirst 300 index of
leading shares fell, led lower by oil stocks as crude prices
slipped toward $40 a barrel.
The FTSEurofirst 300 <> fell 1.9 percent to close at
669.64 points, the lowest close since the index's inception in
July 1997.
"There is disappointment that the interventionist policies
of governments aren't coming together fast enough," said Mike
Lenhoff, chief strategist at Brewin Dolphin.
"The market is being burdened with such huge cash calls and
issuance of corporate debt, as well as government stock," he
said.
Oil rose slightly after slumping 10 percent in the previous
session, but showed little sign of a strong recovery as falling
crude demand overshadowed production cuts by the Organization
of Petroleum Exporting Countries.
U.S. light sweet crude oil <CLc1> rose 26 cents to $40.41 a
barrel.
U.S. government debt was lower. The benchmark 10-year U.S.
Treasury note <US10YT=RR> fell 11/32 in price to yield 2.90
percent. The 2-year U.S. Treasury note <US2YT=RR> fell 1/32 in
price to yield at 0.89 percent.
The prospect of a huge onslaught of U.S. government debt
issuance that is expected to reach some $2 trillion this year
has pushed yields up from record or multidecade lows in
mid-December.
Gold fell 2 percent as waning inflows into exchange-traded
funds and the metal's failure to capitalize on falling stock
markets fueled fears its rally may be at an end.
Spot gold prices <XAU=> fell $14.65 to $911.00 an ounce.
Overnight in Asia, stocks in Tokyo hit a 25-year low and
most major indexes in the region also fell.
Japan's broad Topix index <> hit a 25-year low, while
the Nikkei share average <> slipped to a four-month trough
just above a 26-year low hit last October.
The MSCI index of Asia-Pacific shares outside Japan hit a
three-month low <.MIAPJ0000PUS> but later turned slightly
positive.
(Reporting by Rodrigo Campos, Steven C. Johnson and John Parry
in New York, and Brian Gorman, Ian Chua, Naomi Tajitsu, Chris
Baldwin; Writing by Herbert Lash; Editing by Leslie Adler)
