Stocks, commodities dive on recession fears

Thu Sep 22, 2011 4:33pm EDT
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By Wanfeng Zhou

NEW YORK (Reuters) - World stocks fell to 13-month lows and commodities tumbled on Thursday as weak data from China crystallized investor fears of a global recession one day after a grim economic outlook from the Federal Reserve.

The U.S. dollar climbed to a seven-month high against major currencies .DXY as investors fled risky assets and sought safety in Treasuries, where benchmark yields again touched lows not seen in 60 years.

Data showing contraction in China's manufacturing sector for a third straight month helped drive down oil prices by more than 4 percent and sent the price of copper to a one-year low. Weak euro zone data added to the gloom.

Even gold, a traditional safe haven, dropped nearly 5 percent to its lowest level in nearly one month as the dollar strengthened. The slump raised questions about the precious metal's validity as a safe haven.

Thursday's market meltdown came after weeks of worries that Europe's debt crisis could freeze the global financial system, and a day after the Federal Reserve disappointed markets with its latest effort to boost the economy by lowering long-term borrowing costs. The Fed also spooked investors with a particularly stark assessment of the U.S. economic outlook.

"Global growth worries today are even more prominent than the sovereign crisis, and that's not because sovereign crisis risk has diminished, it's because global growth worries have clearly increased," said Patrick Moonen, equity strategist at ING Investment Management.

The MSCI World equity index .MIWD00000PUS fell 4.5 percent, bringing the year-to-date loss to 16 percent.

U.S. stocks fell sharply for a fourth straight day. The Dow Jones industrial average .DJI ended down 391.01 points, or 3.51 percent, at 10,733.83. The Standard & Poor's 500 Index .SPX was down 37.20 points, or 3.19 percent, at 1,129.56. The Nasdaq Composite Index .IXIC was down 82.52 points, or 3.25 percent, at 2,455.67.   Continued...

<p>The DAX board is pictured at the Frankfurt stock exchange August 19, 2011. REUTERS/Alex Domanski</p>