GLOBAL MARKETS-Stocks slump, bonds rally as global economy fears mount

Wed Oct 15, 2014 2:39pm EDT
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* Caution reigns after disappointing China inflation reading

* Oil prices hit fresh lows on demand fears

* Dollar slumps as investors reassess Fed rate outlook (Updates prices; changes comments)

By Rodrigo Campos

NEW YORK, Oct 15 (Reuters) - Stocks suffered their biggest losses in years and the dollar slumped on Wednesday after the latest inflation data from the United States and China fanned worries about a global slowdown, driving investors into safe-haven government debt.

The S&P 500 fell nearly 3 percent, putting it on track for its worst day in nearly three years, while European equities finished 3.2 percent lower and marked their biggest one-day slide in almost four years.

The selloff wiped out all of the year's gains in major U.S. and European indexes, and a key gauge of Wall Street anxiety hit a three-year high as investors rushed to protect against further losses in markets.

Popular trades that have worked for most of the year, including heavy bets on the dollar, more gains in stocks, and on an eventual rise in yields, are unraveling.

"Right now, the risk play is off the table until stability re-enters, whether it's through better economic data, better grip and understanding of the Ebola concerns," said Andre Bakhos, managing director at Janlyn Capital LLC in Bernardsville, New Jersey.   Continued...