GLOBAL MARKETS-, dollar gains

(Refiles to fix typo in headline)

* U.S. stocks slump as fear of more bank failures grows

* Dollar rises versus yen after strong U.S. factory data

* Oil slips below $69 a barrel on equities, strong dollar

U.S. stocks fell sharply on Tuesday as growing concerns about the U.S. banking system and over whether a recent rally in equity markets is warranted drove investors to the relative safety of bonds and the dollar.

Oil prices fell as the economic concerns outweighed surprisingly bullish U.S. data: the manufacturing sector grew in August for the first time in 19 months, while pending home sales hits a two-year high in July.

Government bond prices on both sides of the Atlantic rose as falling stocks enhanced the allure of lower-risk safe-haven debt despite the fresh evidence supporting the view of a global economic recovery.

There are “new concerns about the health of the banking system, the number

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Base metals all posted mediocre gains on Friday. Copper climbed 2.72 cents to close at $2.4082/lb. Nickel added nearly 4 cents to finish at $7.2507/lb. Zinc gained more than 3 pennies, ending at $0.7182/lb. Aluminum tacked on more almost 1 cent, closing at $0.7589/lb., while lead moved to $0.7533/lb., up almost three-and-a-half pennies from the previous session.

Copper closed at its highest price this year on Friday, also boosted by the unexpected jump in U.S. home construction data.

The big boost in U.S. housing permits coupled with weakness in the U.S. dollar and a strong expansion in China’s economy combined to drive the price of copper up nearly 10% on the week, said Michael Pento, chief economist with Delta Global Advisors.

“An upper-cut, a left hook, and a body blow … what a three-punch combination to power copper up through its $2.40 resistance level,” he said.

Despite the stronger tone this week, analysts

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The base metals were mostly lower on Tuesday. Copper had rallied from the late pre-dawn hours to mid-morning, pushing past $2.27, but then fell off sharply to noon before edging a bit higher late to finish at $2.2114, down almost 2 cents.

Nickel followed a similar path, closing just off its intraday lows at $7.0322/lb., down 17 cents. Zinc didn’t come as far off its morning highs, and ended at $0.6987/lb., up more than three-quarters of a cent. Aluminum was little changed, shedding a quarter-cent, to $0.7153/lb., while lead also dropped a bit, losing a third of a cent, to $0.7518/lb.

Copper led most of the industrial metals lower yesterday, as an early rally was snuffed out by economic jitters.

“It’s a bit of hesitation we’re seeing today,” said Robin Bhar, senior metals analyst at Calyon. “Prices seem to have stalled in both equity and commodity markets … as this

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We are now suffering the consequences of one of the most spectacular financial miscalculations in history, after investors around the world discovered that trillions of dollars invested in securities derived from U.S. home mortgages were far riskier than they had originally believed.

Part of this miscalculation can be attributed to misguided quantitative models that were used to assess those risks. The key inputs for those models were assumptions about underlying default rates and their correlations across different borrowers. Default rates and correlations were quite low up until 2005, because rising home prices made default a decidedly inferior option to refinancing for even the least credit-worthy borrower. But the rising home prices were themselves caused by the huge flow of capital for lending to this market, sucked in by the illusion of safety. When the flow of credit stopped and house prices began to fall, the

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In the currency market, the dollar slid against the euro. Late Thursday, the euro was trading at $1.2668 vs. $1.255 on Wednesday.

“Traders have poured back into the euro today on news that Germany will spend more of its Treasury to support a union to which it is anchored,” wrote Jack Crooks, of Black Swan Capital.

Germany’s Cabinet on Wednesday approved legislation that would allow the forced nationalization of banks as a last resort. And Chancellor Angela Merkel said yesterday that Germany is willing to shore up the International Monetary Fund if needed.

Merkel added that the euro zone “is strong and has proven its worth in the crisis.”

“There’s a sense perhaps that Europe is going to take an activist role, or acknowledge that more needs to be done,” said Daragh Maher, currency strategist at Calyon.

Among the hard data, the Labor Department reported that producer prices rose in January for the first

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by Edward Hugh: Barcelonabr /br /blockquoteKeynes’s genius – a very English one – was to insist we should approach an economic system not as a morality play but as a technical challenge.br /Martin Wolf, a href=”http://www.ft.com/cms/s/0/be2dbf2c-d113-11dd-8cc3-000077b07658.html”Financial Times/a/blockquotebr /br /The euro fell again yesterday, by 1.1 percent against the dollar (to $1.2860) and by 1.2 percent against the yen (to 117.52 yen). The change, even if quite large in a short space of time, is hardly dramatic, but what is of more interest is the why. Russian companies announced yesterday that they were thinking of opening negotiations to “restructure” their debt. a href=”http://www.bloomberg.com/apps/news?pid=20601101sid=aq5iyuLURj1srefer=japan”Bloomberg/a:br /br /blockquoteThe euro fell after a Russian bank official said the nation’s lenders asked the government to help moderate talks with foreign lenders on $400 billion of loans, adding to speculation financial turmoil in Europe is worsening. br /br /The euro fell versus 13 of the 16 most-active …

by Edward Hugh: Barcelonabr /br /blockquote“Happy families are all alike; every unhappy family is unhappy in its own way”br /Tolstoy/blockquotebr /Well this strongis/strong an interesting little fable of modern family life, even if all the families involved may not be ones which many of my readers would normally wish to belong to.br /br /As is now reasonably well know Russian private oil company Lukoil is currently making a bid for the shares in Spanish energy company Repsol which are owned by the deeply indebted Spanish property company Sacyr Vallhermosa.br /br /Shares in what is Spain's fifth biggest builder, and which currently occupies the somewhat ignominious position of being Spain's worst-performing stock this year, jumped the most in two years last Thursday (20 November) on reports they were about to sell their 20 percent stake in Repsol YPF to the Russian oil company OAO Lukoil. Sacyr, which said last week it ...

The base metals were all off to the races on Wednesday. Copper blasted back over the $2 mark, rising from the pre-dawn hours to past noon before easing a bit and finishing at $2.0678/lb., up 14¾ cents. Nickel followed a similar path, cresting above $6 before pulling back to close at $5.8559/lb., up 61¼ cents.

Zinc was strong, ending just off its intraday high at $0.5375/lb., up nearly 5 cents. Aluminum hit 97 cents before beating a sharp retreat back to $0.9479/lb., up three-quarters of a penny, while lead shot up to $0.6728/lb., up 3¼ cents.

Copper led the industrial metals on a tear yesterday, shooting up the most in two years, as traders became consumed with optimism generated by the Federal Reserve.

The metal is up 25% so far during this comeback week.

The price of copper is also likely to be supported by “supply-side vulnerability,” according to analysts at

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