* World stocks fall on worries over U.S. fiscal cliff
* Euro falls before Greece vote on austerity
* U.S. bonds, dollar rise on safe-haven bids
* Gold gives up gains after hitting 2-week high
By Richard Leong
NEW YORK, Nov 7 World shares and the euro fell
on Wednesday as investors worried that the deep fiscal challenge
facing President Barack Obama after his re-election could lead
to a new recession.
Fresh concerns about Europe's debt crisis added to the
jitters among investors, who scrambled for safer assets. U.S.
Treasury yields were set for their biggest one-day fall since
Worry persisted whether Obama could reach a timely deal with
Republican lawmakers in the lame-duck session of a divided
Congress to avert the "fiscal cliff" -- the $600 billion in
automatic tax hikes and spending cuts set to start kicking in on
J an. 1.
"The minute such a deal is cut, we'll boom. If one is not
cut - and soon - we may well double-dip into recession," said
Robert L. Reynolds, president and chief executive of Putnam
Investments in Boston.
"This upcoming lame-duck session may just be the most
consequential in our lifetimes. The stakes are high and the time
is short," he said in a statement.
Traders were also worried about a vote in Greece's
parliament later o n W ednesday on an austerity package needed to
secure a fresh injection of international aid and avert
bankruptcy, which would rock the euro zone and world markets.
European Central Bank President Mario Draghi said the ECB
expects the euro zone economy to remain weak "in the near term"
and that the problems were spreading to Germany.
"A lot depends on this vote today in Greece," said Mark
Priest, head of Index & Equity Market Making at ETX Capital in
The drop in U.S. equities was similar to the one on the day
after Obama won his first White House term in 2008.
In midday trading, the Dow Jones industrial average
was down 301.23 points, or 2.27 percent, at 12,944.45. The
Standard & Poor's 500 Index was down 31.47 points, or
2.20 percent, at 1,396.92. The Nasdaq Composite Index
was down 68.35 points, or 2.27 percent, at 2,943.58.
Energy shares succumbed to intense selling pressure, as
companies in the sector will likely see more regulation in
Obama's second term, with less access to federal lands and water
even as the administration promotes energy independence. James
River Coal tumbled 24 percent to $3.56 a share.
The FTSE Eurofirst 300 index of top European shares
slid 1.2 percent to 1,101.50.
Bucking the market were French banking stocks. They were
helped by BNP Paribas' forecast-beating quarterly
earnings, which sent its shares 2 percent higher to 39.93 euros.
European and Asian stock markets rose initially on relief
buying when U.S. election results for the White House and
Congress were clear and reinforced expectations the Federal
Reserve's ultra-loose monetary policy will continue.
The MSCI world equity index was briefly 0.4
percent higher before falling 1.4 percent to 327.10.
As worries over the U.S. fiscal cliff and Greece's austerity
votes moved to the forefront, investors flocked to the safety of
low-risk assets, including the greenback and U.S. and German
The dollar recovered from early losses, resuming its rally
during this week's tense run-up to the U.S. election. The dollar
index that measures the greenback against a basket of major
currencies was up 0.2 percent, touching a two-month high
earlier at 80.924.
The euro on the other hand fell 0.4 percent to
$1.266, retreating from a session high of $1.2876.
Gold turned lower after hitting a two-week high. It
was last 0.5 percent lower at $1,707.59 an ounce.
In the bond market, the yield on 10-year Treasury notes
was 1.637 percent, on track for its biggest
single-day drop since May 30, according to Reuters data.
German Bund futures climbed 64 basis points, or 0.5
percent, at 142.72.
Worries about weaker energy demand caused a sell-off in the
oil market after it rallied on Tuesday. Brent crude oil
fell $3.16 to $107.91 a barrel and U.S. oil futures fell
$3.58 to $85.13.