NEW YORK: Global stock indexes and the euro sank on Monday on doubts that a European summit this week would move any closer to solving the region's festering debt crisis, a pessimistic outlook that sparked a bid for safe-haven assets.
The euro fell broadly on investor skepticism that the meeting of European Union leaders on Thursday and Friday will produce substantive measures to tackle the debt crisis, now in its third year and buffeting Spain, the euro zone's fourth-largest economy.
Spanish and Italian bond yields rose in a sign of investor skittishness, while the dollar and U.S. government d ebt prices ga ined as investors sought safety.
Decliners beat advancers by a ratio of about 3 to 1 on both the New York Stock Exchange and the Nasdaq in light trade.
The Dow Jones industrial average lost 138.12 points, or 1.09 percent, to close at 12,502.66. The Standard & Poor's 500 Index fell 21.30 points, or 1.60 percent, to finish at 1,313.72. The Nasdaq Composite Index slid 56.26 points, or 1.95 percent, to end at 2,836.16.
The CBOE volatility index, Wall Street's so-called fear index, shot up 12.5 percent to 20.38, and debt prices surged.
European equity markets also fell.
The FTSEurofirst 300 index dropped 1.6 percent to close at 986.41 points, its biggest daily decline in more than three weeks as stocks retreated for a third successive session.
The MSCI all-country world equity index slipped 1.4 percent, while its emerging market index also fell 1.4 percent.
The price of the benchmark 10-year U.S. Treasury note rose 22/32 to yield 1.61 percent. The 30-year U.S. Treasury bond shot up 27/32 to yield 2.68 percent.
MERKEL: NO EURO-ZONE BONDS
German Chancellor Angela Merkel dashed any lingering hope in financial markets that Europe would issue common euro-zone bonds to underpin its single currency after Spain formally became the fourth country to request a financial rescue.
Merkel said shared debt liability within the euro zone was "economically wrong" and "counterproductive."
The two-day summit in Brussels will be the 20th time EU leaders have met to try to resolve a crisis that has spread across Europe since it began in Greece in early 2010.
"There's been a lot of rhetoric coming out of Europe about the meeting later this week not really accomplishing anything, so everybody is just running from risk to something perceived as being safe," said Jeffrey Given, managing director and portfolio manager at John Hancock Asset Management in Boston.
"People are moving out of stocks and into Treasuries. Once again, everyone is trying to preserve capital," Given said.
Spanish government bonds came under pressure after Spain
formally requested aid to recapitalize its banks, but did not specify how much money it would need.
Ten-year Spanish government bonds fell, pushing yields higher to 6.64 percent, while the cost of insuring five-year Spanish debt also rose.
German bonds snapped three weeks of losses to gain on safe-haven buying. The price of bund futures settled up 127 ticks at 142.15 while the yield on 10-year government bonds fell to 1.465 percent.
Pessimism about the European summit's outcome drove all markets.
"There's some nervousness ahead of the EU summit. Reports about the meeting have not intensified hopes or expectations that there will be agreement or any big progress," said Niels Christensen, currency strategist at Nordea.
The euro fell to its lowest in almost two weeks against the dollar and looked set to extend losses.
The euro fell as low as $1.2469, the weakest since June 12, and was last down 0.4 percent at $1.2503. Against the yen, the euro lost 1.4 percent to 99.58 yen.
Brent crude fell below $90 at one point, with concerns about faltering global growth and Europe's debt crisis hitting investor confidence. But the global benchmark for oil ended the day slightly higher after trading lower for most of the session.
The August contract for Brent crude edged up 3 cents to settle at $91.01 a barrel. In contrast, U.S. crude shed 55 cents to settle at $79.21 a barrel.
News that Cyprus became the fifth euro-zone country asking for emergency funding just hours after Spain formally requested help for its banks helped fuel gold prices.
U.S. gold futures for August delivery gained $21.50 to settle at $1,588.40 an ounce.
The Thomson Reuters-Jefferies CRB index of leading commodities rose 1.09 percent to 270.90, as gains in grains and metals helped to offset a weaker oil market. - Reuters
Wall Street tumbles on European summit skepticism
NEW YORK: Stocks fell sharply on Monday, putting the S&P 500 near break-even for June so far, as investors saw little reason to be optimistic about a European Union summit this week.
Markets remain sensitive to European headlines as the region's spiraling debt crisis could wreak further havoc on a slowing global economy.
Financial and energy stocks were among the primary drags. U.S. crude futures lost 0.7 percent to remain near the eight-month low hit last week. News that Spain had requested help for its struggling banks pressured financial stocks.
Expectations for the two-day summit, which starts on Thursday, are low after Germany resisted pressure for common euro zone bonds or a flexible use of Europe's rescue funds at a meeting of the region's four biggest economies last week.
"Last week we were very hopeful that they were moving forward and the meetings this week would have a positive ending. Today there is a lot of doubt the EU summit will generate anything substantial," said Gail Dudack, chief investment strategist for Dudack Research Group in New York.
Austerity measures pushed forward by Germany have Greece mired in a long recession. Investors worry Spain could be the next domino to fall as Madrid's borrowing costs remain stubbornly high.
For the month, the Dow is up 0.88 percent while the S&P 500 is up 0.26 percent. The Nasdaq is up 0.31 percent.
Spain formally requested euro zone rescue loans for up to 100 billion euros ($125 billion) to recapitalize its banks, saying the final amount of assistance would be set at a later stage. Some market economists say it is merely a prelude to a full bailout for Spain.
Volume was light with about 5.84 billion shares traded on the New York Stock Exchange, NYSE Amex and Nasdaq, well below the daily average of 6.85 billion.
Declining stocks outnumbered advancing ones on the NYSE by 2,319 to 686, while on the Nasdaq, decliners beat advancers 1,868 to 649. - Reuters
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