European crisis spurs flight to safety

NEW YORK: Fears of a Greek default and credit contagion ripped through markets on Monday, pushing equity prices lower in thin trading, while yields on government debt were mostly lower as investors dumped assets perceived as risky and bought safe-havens.

Concerns that Moody's Investors Service could downgrade the credit-worthiness of French banks and the lack of a solution to Greece's debt problem undermined investor confidence.

Safe-haven buying briefly pushed yields on benchmark US Treasury 10-year notes to lows last seen at least six decades ago and 10-year Bund yields fell to 1.73 percent.

Some US government debt prices later pared their gains, with the benchmark 10-year US Treasury note off 3/32 in price to yield 1.93 percent.

The euro rebounded from a seven-month low against the US dollar, gaining almost 0.4 percent to 1.3618.

Shares of French banks Societe Generale, Credit Agricole and BNP Paribas slumped more than 10 percent amid expectations of an imminent downgrade, due largely to their exposure to Greek bonds.

Adding to the gloom was the failure of a weekend meeting of finance ministers from the Group of Seven industrialized nations to generate fresh proposals for boosting global growth.

"US investors are faced with a barrage of bad news from European markets," said Andrew Wilkinson, senior market analyst at Interactive Brokers Group in Greenwich, Connecticut.

The pan-European FTSEurofirst 300 index of top shares fell 2.6 percent, after earlier slumping to 883.04, its lowest since July 2009. The index has lost more than 20 percent in 2011.

MSCI's all-country world equity index fell 1.9 percent.

On Wall Street, the Dow Jones industrial average was down 70.34 points, or 0.64 percent, at 10,921.79. The Standard & Poor's 500 Index was down 5.25 points, or 0.45 percent, at 1,148.98. The Nasdaq Composite Index was up 4.94 points, or 0.20 percent, at 2,472.93, recovering from an early loss.

Global central bankers meeting in Basel, Switzerland said economic growth is slowing but there is no sign of a worldwide recession and they had no plans for concerted action.

Brent crude oil fell 74 cents per barrel to $112.03. US crude rose 31 cents to $87.55.

"There are fears about the slowing economy, fears about the debt, fears about default and we are not having coordinated multilateral actions being taken; we are having the opposite," said analyst Robin Bhar of Credit Agricole.

Against the yen, the euro fell to 103.89 yen, its lowest in 10 years, according to Reuters data. The euro was trading at 105.01, off about 0.1 percent.

The dollar was up against a basket of major currencies, with the US Dollar Index up 0.2 percent at 77.309.

Against the Japanese yen, the dollar was down 0.62 percent at 77.07 as the Japanese currency benefited from safe-haven buying.

Spot gold prices fell $26.06 to $1,831.20 an ounce.

Copyright Reuters, 2011