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GLOBAL MARKETS-Oil skids, sparking commodities rout, stock slide

Published 05/11/2011, 04:37 PM
Updated 05/11/2011, 04:40 PM
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* Oil slides more than 5 pct, drives wider commods fall

* Tumble in energy shares leads Wall Street lower

* Euro also down on Greek debt jitters, hits 3-week low

* China industrial output growth eased in April (Adds details, updates to Wall St close)

By Leah Schnurr

NEW YORK, May 11 (Reuters) - A slide in oil prices on Wednesday sparked the second rout in commodities in less than a week, driving investors away from riskier investments, including stocks, and sending the euro to a three-week low.

U.S. crude oil prices tumbled by more than 5 percent, falling below $100 a barrel, after data showed increases in crude and gasoline inventories and signs that China's economy is cooling.

Other commodities slumped, with spot silver down 8 percent. The Reuters-Jefferies CRB index <.CRB>, a global benchmark for commodities prices, dropped 3 percent.

On Wall Street, all three major indexes fell about 1 percent, led by losses in energy shares, while the dollar and U.S. Treasuries gained on a safe-haven bid.

Heightened worries about debt-stricken European countries also hit the euro, just a week after the currency rose to a 17-month high against the dollar.

"With the dollar continuing to strengthen, commodities like oil should continue to trade off, given the inverse relationship between the dollar and some of these commodities," said Phil Orlando, chief equity market strategist at Federated Investors in New York.

"All these different issues -- currencies, the commodities, equity prices, the risk trade -- all seems to be somewhat interrelated."

Brent crude settled down $5.06 at $112.57 a barrel, while U.S. crude futures dropped $5.67 to settle at $98.21.

The Dow Jones industrial average <.DJI> dropped 130.33 points, or 1.02 percent, to 12,630.03, according to the latest available figures. The Standard & Poor's 500 Index <.SPX> fell 15.08 points, or 1.11 percent, to 1,342.08. The Nasdaq Composite Index <.IXIC> dropped 26.83 points, or 0.93 percent, to 2,845.06.

The drop ended a three-day rally on Wall Street, and oil-related exchange traded funds fell sharply.

About 5 stocks fell for every 1 that rose on the New York Stock Exchange, a broad exodus signaling that investors saw little value in most industries.

The U.S. oil fund LP fell 4.2 percent to $39.35, the Energy Select Sector SPDR Fund was down 2.9 percent at $74.28 and the U.S. gasoline fund LP dropped 6.4 percent to $51.44.

The U.S. inventory report showing "a build in gasoline stocks last week was a surprise, and that shook the market, adding to earlier worries about signs of cooling in China's economy," said Phil Flynn, analyst at PFGBest Research in Chicago.

The price of gasoline also slumped, triggering a brief trading pause on the New York Mercantile Exchange. U.S. gasoline for June delivery fell 25.69 cents to $3.1228 a gallon. It was the biggest one-day drop since late September 2008.

DEBT WORRIES DOG EURO

New outbreaks of unrest in Europe highlighted the worries over debt-laden nations.

The euro firmly broke below its 50-day moving average around $1.43, which traders are likely to take as a sign of more losses to come. The euro last traded down 1.5 percent on the day at $1.4193 , after hitting a session low of $1.4172 on trading platform EBS, the lowest since April 18.

"It's a combination of renewed concern about peripheral Europe and positioning that's leading to this bout of risk aversion," said Paresh Upadhyaya, head of Americas G10 FX Strategy at BofA Merrill Lynch Global Research in New York.

In Greece, police fired tear gas at dozens of youths hurling stones in central Athens and a strike against budget tightening brought much of the nation to a halt during talks on the next slice of a bailout package. For details, see [ID:nLDE74A0SY]

EU finance ministers will discuss Greece's debt crisis next week. [ID:nLDE74A0SY]

Ministers are likely to tell Greece it must deliver on savings and privatization targets already agreed if it wants new emergency financing next year.

Meanwhile, Portugal hopes its bailout plan will be approved on Monday. Finland said it will participate in the aid plan, while the heads of Germany's coalition parties will voice their support for the bailout, according to a draft paper seen by Reuters. [ID:nLDE74A2A4]

Data out of China showed the country's industrial input growth eased much more than expected in April, even as inflation remains stubbornly high. [ID:nL3E7GB0H2]

China is a major consumer of silver and the second-largest consumer of gold. More than half of silver's global output is consumed by the industrial sector.

World stocks as measured by the MSCI stock index <.MIWD00000PUS> were down 0.8 percent. But European shares held onto gains. The FTSEurofirst 300 index <.FTEU3> closed up 0.3 percent. (Additional reporting by Chuck Mikolajczak, Wanfeng Zhou, Gene Ramos and Matthew Robinson; Editing by Leslie Adler)

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