Grim outlook pummels global stocks

By Daniel Bases

NEW YORK (Reuters) - A new round of grim economic news, capped by a declaration that the United States slipped into recession a year ago, pummelled stocks on Monday, driving the S&P 500 down almost 9 percent, and sending yields on benchmark U.S. treasuries to at least 50-year lows.

Crude oil prices fell to a 3-1/2 year low, sliding 9.5 percent to under $50 a barrel as OPEC deferred a decision to cut supply, driving down energy shares on both sides of the Atlantic.

Federal Reserve Chairman Ben Bernanke warned on Monday the U.S. economy remained under considerable strain and said more interest rate cuts were "certainly feasible," but said the Fed could buy securities directly and backstop markets.

"The main headline is his saying that policy options could include buying long-term Treasuries," said Dustin Reid, currency strategist at RBS Global Banking & Markets.

"Typically we've seen safe-haven flows into Treasuries also lifting the dollar, so it's possible the dollar will get a bit of a bid out of this, but currency trading is going to be choppy," Reid added.

The National Bureau of Economic Research, regarded as the arbiter of U.S. recessions, made official the U.S. economy slipped into recession in December 2007, ending a 73-month economic expansion.

Manufacturing data from China, Europe and America illustrated the impact of economic decline, with a U.S. manufacturing index falling to a 26-year low in November.

"Things are looking quite bleak. Everyone acknowledges that," said Brian Gendreau, investment strategist at ING Investment Management in New York. "The question is to what extent is that already priced into the markets. Apparently, not entirely."  Continued...