GLOBAL MARKETS-Global stocks, oil skid on growth prospects

Published: 22 Jun 2009 12:26:43 PST

* Wall Street falls on economic worries, sliding energy

* U.S. dollar, yen climb as risk appetite retreats

* U.S., euro zone government debt perks up as stocks fall

* Oil falls below $67 a barrel on dollar, weak equities (Adds close of U.S. markets)

NEW YORK, June 22 - Global stocks and oil prices skidded on Monday as doubts about a nascent economic recovery, highlighted by a gloomy World Bank report, weighed on market sentiment.

Worries about global growth prospects were widespread, knocking down commodity prices and driving up aversion to risk. The safe-haven U.S. dollar and yen rose while concerns about the euro zone's outlook pulled down the euro.

Copper shed more than 5 percent to a three-week low, pressured by Chinese demand worries, and gold slid to its lowest since mid-May as the strong dollar helped weaken commodity prices.

U.S. and longer-dated euro zone government debt rose as weak stock markets enhanced the allure of safe-haven assets.

Oil dropped nearly 4 percent to below $67 a barrel as the dollar and weaker equities outweighed concerns about attacks on the oil industry in Africa's top exporter, Nigeria.

The World Bank warned that prospects for the global economy remained "unusually uncertain" despite signs of improvement, and cut its 2009 growth forecasts for most economies to a contraction of 2.9 percent from a 1.7 percent decline in March.

Sounding a similar note, the head of the Organisation for Economic Development and Co-operation said the world's major economies will contract through 2009.

"We see a very difficult 2009," Angel Gurria, head of the 30-nation group of major economies, told Reuters Television in Paris. "Unemployment problems are going to continue to linger."

Worries of a tepid recovery have wilted the optimism that drove the benchmark Standard & Poor's 500 Index up by as much as 40 percent from a 12-year low in March.

Major U.S. oil companies Chevron Corp and Exxon Mobil Corp were the biggest drags on the Dow as crude fell. Chevron shed 3.4 percent and Exxon fell 3.1 percent.

There are "renewed concerns about the extent of the ongoing global recession and the sustainability of the 'green shoots' of recovery," said Samarjit Shankar, director of global foreign exchange strategy at the Bank of New York Mellon in Boston.

The Dow Jones industrial average closed down 200.72 points, or 2.35 percent, at 8,339.01. The S&P 500 shed 28.19 points, or 3.06 percent, at 893.04. The Nasdaq Composite Index slipped 61.28 points, or 3.35 percent, at 1,766.19.

In Europe, the FTSEurofirst 300 index of top regional shares closed 2.8 percent lower at 837.22 -- the lowest closing level since mid-May. The index has jumped about 30 percent since touching a lifetime low in early March.

The euro came under broad pressure and dropped near $1.38 after a closely watched business climate survey in Germany painted a mixed picture. The euro was down 0.6 percent at $1.3857 against the dollar.

Investors awaited the U.S. Federal Reserve's policy-setting Open Market Committee meeting on Tuesday and Wednesday when they expect it to express a slightly brighter economic view. They are also watching whether policymakers address a recent rise in Treasury debt yields.

"We're seeing the euro lower across the board and I think that's largely the result of the mixed Ifo data overnight (in Germany) as well as ongoing position squaring ahead of this week's FOMC meeting," said Omer Esiner, senior currency analyst at Travelex Global Business Payments in Washington.

The dollar was higher against a basket of major currencies, with the U.S. Dollar Index up 0.62 percent at 80.835.

Against the yen, it was off 0.36 percent at 95.91 yen.

As equity markets fell, investors sought out less risky assets. The benchmark 10-year U.S. Treasury note was up 23/32 in price to yield 3.70 percent. The 2-year U.S. Treasury note was up 3/32 in price to yield 1.15 percent.

Oil fell. Nigeria's main militant group said on Sunday it had attacked three oil installations belonging to Royal Dutch Shell in the Niger Delta, widening a month-old offensive against Africa's biggest energy industry.

U.S. crude for July delivery, which expires on Monday, traded down $2.62 to settle at $66.93 a barrel. Brent crude lost $2.21 to settle at $66.98 a barrel.

U.S. gold futures fell toward $920 an ounce as tumbling oil prices decreased funds buying bullion as a hedge. The August futures contract settled down $15.20 at $921 an ounce.

Other commodity prices also fell. Copper for September delivery tumbled 11.75 cents to settle at $2.1440 a pound in New York.

The Reuters/Jefferies CRB Index was down 2.66 percent at 246.07.

The MSCI index of Asia Pacific stocks outside Japan fell 0.09 percent, while Japan's Nikkei share average finished the session 0.4 percent higher.