NEW YORK, March 2 - Global stocks plumbed new multi-year lows on Monday after AIG's record $61.7 billion quarterly loss and an $18.1 billion capital request by HSBC slammed financial markets, sending the dollar to near three-year highs and government debt up as investors sought safe havens.
Oil prices plunged 10 percent as the deteriorating world economy threatened to cut further into fuel consumption.
Insurer American International Group's quarterly loss, the largest in U.S. corporate history, heightened worries about the health of the global financial system and boosted the appeal of government debt and the dollar as low-risk havens.
The worldwide rout in equity markets pushed the Dow and S&P 500 stock indexes below key levels, while the FTSEurofirst 300 .FTEU3 index of leading European shares ended a whisker away from a lifetime low.
The latest bailout of AIG, which lost a total of $99.29 billion last year, unnerved investors who have been seeking assurances that the credit crisis that began in mid-2007 is finally abating. The worsening global economy has only exacerbated sentiment.
"The weight of the evidence is that we're still in a very risky condition in the general economy, and so we're going to new lows," said Joseph Battipaglia, market strategist for Stifel Nicolaus in Yardley, Pennsylvania.
"You can conclude there is a deteriorating confidence in the government's ability to stem the financial crisis -- plain and simple."
The decision by HSBC, Europe's biggest bank, to raise funds via a rights issue to help it overcome big losses contributed to fears that the downward trend is picking up pace.
Stocks sold off worldwide. European shares closed down 5 percent and Asian stocks fell about 4 percent.
U.S. stocks fell 4 percent or more as the Dow closed under the 7,000 mark for the the first time since May 1997 and the S&P 500 slid below 700, before closing slightly higher.
Global stocks, as measured by MSCI's all-country world equity index .MIWD00000PUS, fell almost 5 percent to an almost six-year low.
All 30 components of the Dow closed in the red, and only seven stocks in the S&P 500 rose. Declining shares outnumbered advancing shares by more than 15 to 1 among the 3,168 issues that traded on the New York Stock Exchange, and more than one out of every five of those issues fell to 52-week lows.
Analysts said the news reaffirmed suspicion that more turmoil lies ahead, spurring investors to sell stocks for safer, dollar-denominated alternatives such as Treasuries.
"This is just creating an overall environment where if things get worse at AIG, we could see further write-downs and more problems in the financial sector," said Mark Frey, head of FX trading at global payments dealer Custom House in Victoria, British Columbia.
The Dow Jones industrial average .DJI closed down 299.64 points, or 4.24 percent, at 6,763.29. The Standard & Poor's 500 Index .SPX fell 34.27 points, or 4.66 percent, at 700.82. The Nasdaq Composite Index .IXIC slid 54.99 points, or 3.99 percent, at 1,322.85.
AIG closed flat at 42 cents a share in New York and HSBC fell 18.8 percent in London.
The FTSEurofirst 300 .FTEU3 fell 5.2 percent to 682.31, just shy of a lifetime low of 681.17 hit in March 2003.
The benchmark 10-year U.S. Treasury note rose 38/32 in price to yield 2.88 percent. The 2-year U.S. Treasury note added 5/32 in price to yield 0.90 percent.
Energy stocks fell after crude prices CLc1 tumbled 10 percent to settle just above $40 a barrel as the deteriorating world economy outweighed OPEC's strong compliance with supply curbs.
U.S. crude CLc1 settled down $4.61 to $40.15 a barrel, while London Brent crude LCOc1 fell $4.14 to settle at $42.21 a barrel.
European Union leaders' rejection of a mass bailout for Eastern Europe pushed the euro below $1.26, along with a survey showing euro zone manufacturers had their worst month in 12 years.
The euro fell 0.69 percent at $1.2581, and against the yen, the dollar slipped 0.29 percent at 97.24.
The dollar rose against a basket of major currencies, with the U.S. Dollar Index .DXY up 0.79 percent at 88.861.
Gold dropped after rising earlier. Heavy losses in equity markets triggered profit-taking after the metal failed to climb further above $1,000 an ounce last week.
U.S. gold futures for April delivery GCJ9 settled down $2.50 at $940.00 an ounce in New York.
Oil prices plunged 10 percent as the deteriorating world economy threatened to cut further into fuel consumption.
Insurer American International Group's quarterly loss, the largest in U.S. corporate history, heightened worries about the health of the global financial system and boosted the appeal of government debt and the dollar as low-risk havens.
The worldwide rout in equity markets pushed the Dow and S&P 500 stock indexes below key levels, while the FTSEurofirst 300 .FTEU3 index of leading European shares ended a whisker away from a lifetime low.
The latest bailout of AIG, which lost a total of $99.29 billion last year, unnerved investors who have been seeking assurances that the credit crisis that began in mid-2007 is finally abating. The worsening global economy has only exacerbated sentiment.
"The weight of the evidence is that we're still in a very risky condition in the general economy, and so we're going to new lows," said Joseph Battipaglia, market strategist for Stifel Nicolaus in Yardley, Pennsylvania.
"You can conclude there is a deteriorating confidence in the government's ability to stem the financial crisis -- plain and simple."
The decision by HSBC, Europe's biggest bank, to raise funds via a rights issue to help it overcome big losses contributed to fears that the downward trend is picking up pace.
Stocks sold off worldwide. European shares closed down 5 percent and Asian stocks fell about 4 percent.
U.S. stocks fell 4 percent or more as the Dow closed under the 7,000 mark for the the first time since May 1997 and the S&P 500 slid below 700, before closing slightly higher.
Global stocks, as measured by MSCI's all-country world equity index .MIWD00000PUS, fell almost 5 percent to an almost six-year low.
All 30 components of the Dow closed in the red, and only seven stocks in the S&P 500 rose. Declining shares outnumbered advancing shares by more than 15 to 1 among the 3,168 issues that traded on the New York Stock Exchange, and more than one out of every five of those issues fell to 52-week lows.
Analysts said the news reaffirmed suspicion that more turmoil lies ahead, spurring investors to sell stocks for safer, dollar-denominated alternatives such as Treasuries.
"This is just creating an overall environment where if things get worse at AIG, we could see further write-downs and more problems in the financial sector," said Mark Frey, head of FX trading at global payments dealer Custom House in Victoria, British Columbia.
The Dow Jones industrial average .DJI closed down 299.64 points, or 4.24 percent, at 6,763.29. The Standard & Poor's 500 Index .SPX fell 34.27 points, or 4.66 percent, at 700.82. The Nasdaq Composite Index .IXIC slid 54.99 points, or 3.99 percent, at 1,322.85.
AIG closed flat at 42 cents a share in New York and HSBC fell 18.8 percent in London.
The FTSEurofirst 300 .FTEU3 fell 5.2 percent to 682.31, just shy of a lifetime low of 681.17 hit in March 2003.
The benchmark 10-year U.S. Treasury note rose 38/32 in price to yield 2.88 percent. The 2-year U.S. Treasury note added 5/32 in price to yield 0.90 percent.
Energy stocks fell after crude prices CLc1 tumbled 10 percent to settle just above $40 a barrel as the deteriorating world economy outweighed OPEC's strong compliance with supply curbs.
U.S. crude CLc1 settled down $4.61 to $40.15 a barrel, while London Brent crude LCOc1 fell $4.14 to settle at $42.21 a barrel.
European Union leaders' rejection of a mass bailout for Eastern Europe pushed the euro below $1.26, along with a survey showing euro zone manufacturers had their worst month in 12 years.
The euro fell 0.69 percent at $1.2581, and against the yen, the dollar slipped 0.29 percent at 97.24.
The dollar rose against a basket of major currencies, with the U.S. Dollar Index .DXY up 0.79 percent at 88.861.
Gold dropped after rising earlier. Heavy losses in equity markets triggered profit-taking after the metal failed to climb further above $1,000 an ounce last week.
U.S. gold futures for April delivery GCJ9 settled down $2.50 at $940.00 an ounce in New York.
