* Oil slips on dollar, U.S. industrial data at day's end
* Global stocks turn lower as mixed economic data weighs
* Bonds rise after Fed buys $6.5 bln in government debt
(Updates to close of U.S. markets)
By Herbert Lash
NEW YORK, June 16 (Reuters) - The U.S. dollar fell across
the board on Tuesday, pressured by Russian angling for a new
global reserve currency, while stocks fell on renewed worries
whether the ailing world economy was on the path to recovery.
Oil gave back early gains as the dollar strengthened while
U.S. Treasury bond prices rose after the Federal Reserve bought
a surprisingly large $6.5 billion in government debt.
Concerns that the pace of economic recovery may be more
tepid than initially thought forced a retreat in a broad equity
advance in Europe and the United States.
While U.S. housing starts in May rebounded and producer
prices rose less than expected, suggesting inflation pressures
were muted, another report showed industrial production logged
a steeper-than-expected slide last month.
A Federal Reserve report also said the capacity utilization
rate in May for total industry, a measure of slack in the U.S.
economy, slumped to its lowest on records dating back to 1967.
Other markets also flipped around midday as the perceived
outlook for the U.S. economy turned darker.
"The market's at the turning point," said John Canally,
economist at LPL Financial in Boston.
"It needs to see more evidence that the economy is firmly
in recovery mode and that corporate earnings are going to be
guided higher over the second half," Canally said.
The Dow Jones industrial average <> closed down 107.46
points, or 1.25 percent, at 8,504.67. The Standard & Poor's 500
Index <.SPX> fell 11.75 points, or 1.27 percent, at 911.97. The
Nasdaq Composite Index <> dropped 20.20 points, or 1.11
percent, at 1,796.18.
European shares fell marginally, with weak banking shares
offsetting a rise in defensive sectors.
The FTSEurofirst 300 index <> of top European shares
fell 0.1 percent to close at 862.41.
"There's just no sign that the economy is picking up," said
Marc Pado, U.S. market strategist at a Cantor Fitzgerald & Co
office in San Francisco.
The mixed bag of data was seen as positive for bonds, a
traditional safe haven, as it suggested there are ample hurdles
the economy must overcome before the recession can end.
"The Fed bought more than $6 billion in supply today and
that was seen as aggressive, so that combined with the
turnaround in stocks gave (Treasuries) room to move higher,"
said Mary Ann Hurley, vice president of fixed income trading at
D.A. Davidson & Co in Seattle.
The benchmark 10-year U.S. Treasury note <US10YT=RR> rose
15/32 in price to yield 3.66 percent. The 2-year U.S. Treasury
note <US2YT=RR> rose 2/32 in price to yield 1.19 percent.
Peter Kenny, managing director at Knight Equity Markets in
Jersey City, New Jersey, said concern about the U.S.
government's growing liabilities was weighing on stocks.
"If rates do go higher that is without a doubt the one
impact that will have a global reach for equities," he said.
"Rates are the one factor that could put a real wet blanket on
all equity markets."
The dollar fell on comments by Russian President Dmitry
Medvedev suggesting a need for a global reserve currency other
than the greenback.
"Clearly the largest holders of U.S. Treasuries are
increasingly nervous about the fiscal stability of the U.S.
going forward," said Omer Esiner, senior currency analyst at
Travelex Global Business Payments in Washington.
"That said, I don't think it's to anybody's interest to see
a run on the dollar."
The dollar fell against a basket of major currencies, with
the U.S. Dollar Index <.DXY> off 0.56 percent at 80.705.
The euro <EUR=> was down 1.33 percent at $1.3834. Against
the yen, the dollar <JPY=> was down 2.06 percent at 96.37.
Gold rose in Europe, benefiting from its appeal as a hedge
against potential inflation on the upturn in crude prices.
Copper ended down as investors worried that a recent sharp
run-up in commodity prices might have exceeded fundamentals in
the face of the mixed economic data.
U.S. crude oil <CLc1> settled 15 cents lower at $70.47 a
barrel after rising as high as $72.77. London Brent crude
<LCOc1> settled unchanged at $70.24.
The August gold contract <GCQ9> settled up $4.70 at $932.20
an ounce in New York.
Asian stocks fell as investors cut holdings of riskier
assets and bought yen. Japan's Nikkei share average <>
closed 2.9 percent lower, the biggest single-day drop since
March 30. The MSCI index of Asia Pacific stocks outside Japan
<.MIAPJ0000PUS> fell 1.12 percent.
(Reporting by Ellis Mnyandu, Gertrude Chavez-Dreyfuss and
Matthew Robinson in New York; Rebekah Curtis and Humeyra Pamuk
in London; Writing by Herbert Lash; Editing by James
Dalgleish)
