Global stocks skid on growth prospects

By Herbert Lash

NEW YORK (Reuters) - Global stocks and oil prices skidded on Monday as doubts about a nascent economic recovery, highlighted by a gloomy World Bank report, weighed on market sentiment.

Worries about global growth prospects were widespread, knocking down commodity prices and driving up aversion to risk. The safe-haven U.S. dollar and yen rose while concerns about the euro zone's outlook pulled down the euro.

Copper shed more than 5 percent to a three-week low, pressured by Chinese demand worries, and gold slid to its lowest since mid-May as the strong dollar helped weaken commodity prices.

U.S. and longer-dated euro zone government debt rose as weak stock markets enhanced the allure of safe-haven assets.

Oil dropped nearly 4 percent to below $67 a barrel as the dollar and weaker equities outweighed concerns about attacks on the oil industry in Africa's top exporter, Nigeria.

The World Bank warned that prospects for the global economy remained "unusually uncertain" despite signs of improvement, and cut its 2009 growth forecasts for most economies to a contraction of 2.9 percent from a 1.7 percent decline in March.

Sounding a similar note, the head of the Organization for Economic Development and Co-operation said the world's major economies will contract through 2009.

"We see a very difficult 2009," Angel Gurria, head of the 30-nation group of major economies, told Reuters Television in Paris. "Unemployment problems are going to continue to linger."

Worries of a tepid recovery have wilted the optimism that drove the benchmark Standard & Poor's 500 Index .SPX up by as much as 40 percent from a 12-year low in March.

Major U.S. oil companies Chevron Corp (CVX.N) and Exxon Mobil Corp (XOM.N) were the biggest drags on the Dow as crude fell. Chevron shed 3.4 percent and Exxon fell 3.1 percent.

There are "renewed concerns about the extent of the ongoing global recession and the sustainability of the 'green shoots' of recovery," said Samarjit Shankar, director of global foreign exchange strategy at the Bank of New York Mellon in Boston.

The Dow Jones industrial average .DJI closed down 200.72 points, or 2.35 percent, at 8,339.01. The S&P 500 .SPX shed 28.19 points, or 3.06 percent, at 893.04. The Nasdaq Composite Index .IXIC slipped 61.28 points, or 3.35 percent, at 1,766.19.

In Europe, the FTSEurofirst 300 .FTEU3 index of top regional shares closed 2.8 percent lower at 837.22 -- the lowest closing level since mid-May. The index has jumped about 30 percent since touching a lifetime low in early March.

The euro came under broad pressure and dropped near $1.38 after a closely watched business climate survey in Germany painted a mixed picture. The euro was down 0.6 percent at $1.3857 against the dollar.

Investors awaited the U.S. Federal Reserve's policy-setting Open Market Committee meeting on Tuesday and Wednesday when they expect it to express a slightly brighter economic view. They are also watching whether policymakers address a recent rise in Treasury debt yields.