* Global stocks slide as fears of worldwide slowdown mount
* Gold, bonds, yen all rise as risk aversion returns
* Oil prices slip to 13-month lows on recession worries
(Adds close of European markets, Bernanke, freshens pricings)
By Herbert Lash
NEW YORK, Oct 15 Stocks plunged and oil prices
dove to 13-month lows on Wednesday after a new batch of U.S.
economic data rattled investors who increased their aversion to
risk on growing signs of a deeper worldwide slowdown.
Shorter-term U.S. and euro-zone government debt rose, gold
prices jumped more than 1 percent and the less-risky yen gained
after reports on U.S. retail sales and manufacturing activity
in New York state intensified fears the U.S. economy is in
Major European stock indexes closed down more than 7
percent and U.S. shares, as measured by the broad S&P 500,
dropped more than 5 percent after Federal Reserve Chairman Ben
Bernanke said the U.S. economy faces major headwinds.
"By restricting flows of credit to households, businesses,
and state and local governments, the turmoil in financial
markets and the funding pressures on financial firms pose a
significant threat to economic growth," Bernanke said in
remarks to the Economic Club of New York.
Bernanke said the U.S. central bank would continue to act
aggressively to fight the worst financial crisis since the
1930s. But he said credit markets would take time to unfreeze
and that slowing consumer and business spending, along with a
softening labor market, pointed to shaky economic activity.
U.S. economic data released before Bernanke spoke confirmed
his outlook and the fears of investors.
U.S. retailers posted their biggest monthly sales decline
in more than three years in September, while a gauge of New
York manufacturing fell in October to the lowest since its
inception in 2001.
Shares of big U.S. retailers were bruised by the data, with
Dow components Wal-Mart Stores (WMT.N), the world's largest
retailer, down 4.6 percent, and Home Depot (HD.N) slipping 3.4
Before 1 p.m., the Dow Jones industrial average .DJI was
down 288.48 points, or 3.10 percent, at 9,022.51. The Standard
& Poor's 500 Index .SPX was down 39.53 points, or 3.96
percent, at 958.48. The Nasdaq Composite Index .IXIC was down
58.89 points, or 3.31 percent, at 1,720.12.
Exxon Mobil (XOM.N) was among the biggest drags on the Dow,
falling 7.6 percent as crude prices fell more than $3 on fears
of slower economic growth. Economic bellwether Caterpillar Inc
(CAT.N) gave up 7.5 percent.
"It looks like everything that's economically sensitive is
getting hit pretty good," said Scott Vergin, a portfolio
manager at Thrivent Financial in Minneapolis.
"The thing is how much has the credit crunch already
impacted the real economy?" Vergin said. "That's what
everyone's really worried about."
The FTSEurofirst 300 .FTEU3 index of top European shares
closed 6.5 percent lower at 903.67 points.
Britain's FTSE 100 .FTSE fell 7.1 percent, Germany's DAX
.GDAXI slipped 7.1 percent and France's CAC 40 .FCHI shed
Investors dumped mining shares, with the DJ Stoxx basic
resources index .SXPP plummeting 16 percent, tracking a sharp
sell-off in commodity prices on recession concerns.
"It's the beginning of the end of the financial crisis, but
beyond that a global recession is looming," said Emmanuel
Morano, head of equity management at La Francaise des
Placements, in Paris.
"Fears over a global recession are justified, and these
fears have been priced in very quickly. Valuations in the basic
resources sector are apocalyptic. This sell-off really has the
violence of the crash of 1987."
Oil prices fell to their lowest level in 13 months, dragged
down by expectations that economic weakness will cut further
into demand for crude.
Analysts have scaled back global demand growth estimates,
with the Organization of the Petroleum Exporting Countries
cutting its forecasts for world demand for crude next year in
its latest monthly report. [nWLB2749]
"Even if governments are successful in calming equity
markets and unfreezing credit markets in the near future, the
fallout on the real economy from financial market headwinds is
expected to be considerable," OPEC said.
U.S crude CLc1 was down $2.85 a barrel at $75.78 after
touching a session low of $74.97, its lowest since September
2007. London Brent crude LCOc1 was $3.05 down at $71.48 a
In the Treasury bond market, most U.S. government debt
prices rose on a renewed safety bid, but longer maturity bond
prices fell as investors worried anew about the huge slew of
debt issuance that looms to pay for the U.S. government's
measures to rescue the financial system.
The benchmark 10-year U.S. Treasury note US10YT=RR rose
4/32 in price to yield 4.07 percent. The 2-year U.S. Treasury
note US2YT=RR rose 5/32 in price to yield 1.75 percent.
The dollar rose against major currencies, with the U.S.
Dollar Index .DXY up 0.54 percent at 82.02. Against the yen,
the dollar JPY= fell 0.61 percent at 101.56.
The euro EUR= fell 0.65 percent at $1.3533.
Spot gold prices XAU= rose $8.40 to $843.65 an ounce.
The gloomy economic news and rise in risk aversion came
despite trillions of dollars pledged worldwide to recapitalize
banks and stem the worst financial crisis since the 1930s.
There were glimpses the concerted government efforts
already were taking effect. The rate banks charge each other
for dollar, euro and sterling loans fell for the second
straight day as recent bold steps from authorities around the
world continued to thaw out frozen money markets.
"Following the release of national 'bailout' plans from UK,
Germany, France, U.S. and others, there are early signs that
the severe money-market tension of the last month may be
easing," said Meyrick Chapman, a strategist at UBS.
"We think the easing will continue," Chapman said.
(Reporting by Ellis Mnyandu, Ellen Freilich, Steven C. Johnson
in New York and Jamie McGeever, Ikuko Kao and Jan Harvey in
London and Tyler Sitte in Frankfurt, Writing by Herbert Lash;
Editing by Leslie Adler)