Oil slumps, yen jumps as economy fears prevail

By Walter Brandimarte

NEW YORK (BestGrowthStock) – Growing fears of a double-dip U.S. recession weighed on global stocks and oil prices on Tuesday, pushing investors into the safe-haven yen, which neared a 15-year peak versus the dollar.

Investors also rushed to the relative safety of gold and U.S. Treasury debt. Yields on benchmark 10-year Treasuries were on track to record their largest monthly drop since November 2008, when financial markets were reeling from the Lehman Brothers collapse.

Oil prices, viewed as a proxy for the global economy, slumped nearly 4 percent.

Worries about the world’s largest economy have been boosted by recent reports showing a marked economic slowdown. The latest bad data included an index of business activity in the U.S. Midwest, which rose less than economists expected.

Minutes from the U.S. Federal Reserve’s latest policy meeting, in which policymakers saw increasing risks to economic growth, also contributed to the cautious mood.

U.S. stocks (Read more about the stock market today. ) were supported somewhat, however, by data showing a modest rise in the confidence of U.S. consumers in August, coupled with a larger-than-expected rise in U.S. home prices in June.

“Markets responded to the better-than-expected U.S. consumer confidence, but the markets have not made their mind up about the recovery,” said Mike Lenhoff, chief strategist at Brewin Dolphin. “There are still worries about a double-dip recession.”

The Dow Jones industrial average (.DJI: ) ended up 4.99 points, or 0.05 percent, at 10,014.72, while the Standard & Poor’s 500 Index (.SPX: ) edged up 0.41 point, or 0.04 percent, to 1,049.33. The Nasdaq Composite Index (.IXIC: ) declined 5.94 points, or 0.28 percent, to 2,114.03.

For the month, both the Dow and the S&P 500 lost more than 4 percent. The Nasdaq fell more than 6 percent.

European stocks erased losses after the U.S. consumer confidence data but still recorded their largest monthly decline in August since May.

The FTSEurofirst 300 index (.FTEU3: ) of top European shares eked out a gain of 0.08 percent after falling as much as 1.3 percent earlier on Tuesday. It lost around 2 percent in the month.

The MSCI All-Country World equity index (.MIWD00000PUS: ) slid 0.26 percent.

In another sign of investor concern about the sustainability of the global recovery, oil prices fell for the second consecutive session.

U.S. crude oil prices for October delivery settled down $2.78, or 3.72 percent, at $71.92 a barrel. The contract extended losses after settlement, tumbling 4.4 percent from the Monday close to $71.53 a barrel.

YEN NEARS 15-YEAR HIGH

The yen on Tuesday neared a 15-year high against the dollar, marking its fourth monthly rise, as U.S. economic concerns boosted the safe-haven appeal of the Japanese currency.

The strengthening of the yen came despite Japan’s decision to expand cheap loans to banks, a symbolic monetary easing move considered a sign that authorities may act further to stop the currency appreciation.

“The policy action by the BoJ isn’t going to change the market’s mood. It would probably take intervention to shake things up a bit,” said Vassili Serebriakov, currency strategist at Wells Fargo in New York.

The dollar was down 0.69 percent against the yen at 84.02. It had earlier fallen to 84.83, according to Reuters data, not far from its 15-year low of 83.58 set on electronic trading platform EBS last week.

The euro was up 0.12 percent at $1.2678.

U.S. Treasury prices gained further as investors sought safety amid signs of a faltering economy.

The benchmark 10-year U.S. Treasury note was up 17/32 in price, with the yield at 2.47 percent. The 30-year bond rose 36/32, with the yield at 3.522 percent.

August has proven a banner month for government bonds, with benchmark 10-year notes and the 30-year bond on track for the biggest monthly dip in yield since November 2008, when the financial sector was reeling from the Lehman Brothers bankruptcy and the credit crisis reached its peak.

Spot gold, another safe-haven investment, gained $10.35, or 0.84 percent, to $1,246.60, the highest since late June.

(Additional reporting by John Parry, Rodrigo Campos, Vivianne Rodrigues and Aleksandra Michalska; Editing by Dan Grebler)

Oil slumps, yen jumps as economy fears prevail