Dollar Firms, Oil Sags As Economies Slump

Stocks fell on concerns about the fourth-quarter earnings that U.S. companies begin reporting this week.

The dollar hit a one-month high against euro on Monday as investors positioned for a rate cut from the European Central Bank, while oil prices fell 7 percent as global economic slowdown sapped energy demand.

Stocks fell on concerns about the fourth-quarter earnings that U.S. companies begin reporting this week, which also helped push bond prices higher.

Lower oil prices and a stronger dollar helped depress gold prices.

Friday's December U.S. payrolls report, which showed more than half a million jobs lost and the highest unemployment rate since 1993, deepened concerns about U.S. consumer spending and corporate profits in the country's year-old recession.

"Global equities have sold off as a result of the darkening outlook for the global economy and that has rekindled demand for the relative safety of U.S. assets," said Omer Esiner, senior market analyst at Ruesch International in Washington. "Expectations for a euro-zone rate cut on Thursday are undermining the euro."

Data last week showed factory output collapsing across Europe, raising expectations that the European Central Bank will cut rates by 50 basis points to 2.00 percent when it meets on Thursday.

Against the dollar, the euro briefly fell below $1.33 and was last at 1.3395.

The dollar tumbled to a three-week low against the yen, according to Reuters data, last trading at 89.07 yen. The euro earlier hit a one-month low against the Japanese currency.

Alcoa Inc was one of the biggest drags on the U.S. stocks. The aluminum producer was scheduled to kick off the earnings season when it posts fourth-quarter results after the close of U.S. trading.

Citigroup fell after news the embattled U.S. bank is nearing a deal to sell a controlling stake in its Smith Barney retail brokerage to Morgan Stanley.

"The perception is that this is a desperate measure taken by a firm in turmoil to try to throw itself a lifeline," said Jack Ablin, chief investment officer at Harris Private Bank in Chicago. "Investors don't see catalysts. There's a real worry that earnings estimates are just too optimistic."

As economic data points to a sharp slowdown in industrial activity across the world, demand for crude oil is wilting. Oil prices fell 7 percent just below $38 per barrel to the lowest since Dec. 19.

On U.S. stockmarkets, shortly after 12:30 p.m., the Dow Jones industrial average fell 0.87 percent, to 8,524. The Standard & Poor's 500 Index was down 1.57 percent, at 876. The Nasdaq Composite Index was down 1.5 percent, at 1,548.

In Europe, the FTSEurofirst 300 index of top shares provisionally closed down 1.5 percent at 854.09 points. It plunged 45 percent in 2008.

Falling stocks sparked demand for the relative safety of government securities. The benchmark 10-year U.S. Treasury note's price, which moves inversely to its yield, rose 16/32 for a yield of 2.34 percent. The 2-year U.S. Treasury note rose 2/32 in price to yield 0.73 percent.

Euro zone government bond prices mostly pushed higher on Monday as share markets fell, spurring bids for low risk assets, with investors favoring benchmark German Bunds over regional peers.

March Bund futures rose 39 ticks on the day to 125.11.

Spanish 10-year government bond yield spreads stayed near historic wides against counterpart benchmark German bunds after ratings agency Standard & Poor's said it may cut Spain's "AAA" sovereign credit rating.

U.S. gold for February delivery slipped $29.4 at $825.6 an ounce, pressured lower by the stronger dollar.

The MSCI index of stocks in the Asia-Pacific region outside Japan slipped 0.7 percent and Japan's Nikkei share average finished 0.45 percent lower.