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GLOBAL MARKETS-Gold sets record high, global stocks slip anew

Published 08/19/2011, 02:35 PM
Updated 08/19/2011, 02:36 PM
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* Gold hits record high on renewed safe-haven bid

* Global stocks slide as dollar's slump buoys commodities

* Traders speculate Japanese authorities won't intervene

* Bank funding concerns, recession fears still a concern (Updates prices)

By Herbert Lash

NEW YORK, Aug 19 (Reuters) - Gold set a fresh record high and equity markets slid anew on Friday as lingering fears about Europe's debt crisis and a possible slide by major economies into recession kept the bid for safe-haven securities alive.

Commodity prices rebounded after the U.S. dollar plunged to a record low against the yen on speculation Japanese authorities will not intervene often to halt the yen's surge.

Gold prices early in the session rallied almost 3 percent as investors sought refuge from Thursday's hefty losses in stocks, when the yield on 10-year U.S. government bonds slipped below 2 percent for the first time in 60 years.

Spot gold jumped to a record $1,877 an ounce and was last trading near $1,846.50, still on track for its biggest one-month rise in nearly 12 years in August.

U.S. stocks see-sawed and then turned lower while European stocks closed down on recession fears and concerns about regional bank funding.

Friday was "a continuation of the same two themes: concern over the prospects for world growth and concerns over the stability of the euro zone," said Alan Brown, chief investment officer at Schroders, which manages $329 billon in assets, in a note to investors.

U.S. stocks edged down on Hewlett-Packard 's weaker outlook and corporate shake-up added to a wealth of uncertainty for investors.

The major U.S. equity indices swung between positive and negative before pushing lower in the afternoon, reflecting the volatility that has rocked markets in past weeks.

"What I'm seeing right now is a basically a crisis of confidence, moreso than an economic crisis or financial crisis necessarily at this stage," said Natalie Trunow, chief investment officer of equities at Calvert Investment Management in Bethesda, Maryland, which manages about $14.8 billion.

David Mann, regional head of research for the Americas at Standard Chartered in New York, said: "We shouldn't read too much into today's moves. The market is very choppy and cautious."

On Wall Street, the Dow Jones industrial average <.DJI> was down 96.19 points, or 0.88 percent, at 10,894.39. The Standard & Poor's 500 Index <.SPX> was down 8.25 points, or 0.72 percent, at 1,132.40. The Nasdaq Composite Index <.IXIC> was down 17.87 points, or 0.75 percent, at 2,362.56.

European shares flirted with two-year lows.

The FTSEurofirst 300 <.FTEU3> index of top European shares closed down 1.7 percent lower at 909.79. MSCI's all-country world stock index <.MIWD00000PUS> was off 1.4 percent, while emerging markets stocks <.MSCIEF> fell 2.6 percent.

The dollar fell as low as 75.941 yen on trading platform EBS. It last traded at 76.501 yen, down 0.1 percent.

Currency traders were emboldened by a Wall Street Journal report citing Japan's top currency official as saying Japanese authorities do not plan to intervene in the market often. For details see: [ID:nN1E77I0L5]

The dollar's slump turned commodity markets, where crude oil prices rose about 2 percent at one point. ICE Brent October crude rose $1.31 to $108.30 a barrel. U.S. crude oil fell 12 cents to $82.26 per barrel.

U.S. Treasury yields inched up from a low of 1.97 percent on Thursday as some investors took profits. [ID:nN1E77I09T]

The benchmark 10-year U.S. Treasury note was down 6/32 in price to yield 2.09 percent.

Yields have dropped almost a full percentage point on the 10-year note in August as disappointing economic data, the Federal Reserve's low interest rate policy and jitters over rising bank funding costs drove investors to safe-haven bonds.

"At the moment the market is just looking for relative safe havens," said Mitsui Precious Metals analyst David Jollie. "You can see that in the sell-offs across equity markets overnight. The strength of gold is the other side of the coin from that."

The U.S. dollar index <.DXY> slipped 0.4 percent to 73.974. The euro was up 0.6 percent at $1.4381. (Reporting by Rodrigo Campos, Gertrude Chavez-Dreyfuss and Karen Brettell in New York; Barbara Lewis and Jan Harvey in London; Harro ten Wolde in Frankfurt; Writing by Herbert Lash; Editing by Dan Grebler)

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