(Adds close of European markets, oil settlement prices)
* Crude prices slip from 1-year high as supply glut weighs
* U.S. stocks weaken as crude slumps and Fed rate hike seen
* U.S. yields hit highest since June as risk appetite rises
By Herbert Lash
NEW YORK, Oct 11 Slumping crude prices and a
dour start to Wall Street's corporate earnings season pulled
down U.S. and European equities on Tuesday, while the dollar hit
an eight-month high on increasing bets U.S. interest rates will
rise in December.
Wall Street fell more than 1 percent after shares of
aluminum producer Alcoa and diagnostics test maker
Illumina plunged, with worries over the make-up of the
U.S. Congress after November's election also weighing on stocks.
Shares of Alcoa tumbled 11 percent and Illumina plummeted 26
percent, casting a shadow over the market. Wall Street's "fear
gauge," the CBOE Market Volatility index, rose 21 percent
to an almost four-week high of 16.25.
The UK benchmark FTSE 100 equity index reversed
course after it set a record intraday high that was helped by
further sterling weakness.
The British pound has lost more than 4 percent of its value
against the dollar over the past week as investors fret about a
"hard exit" by Britain from the European Union.
In the United States, investors are looking to Wednesday's
release of the minutes from the Fed's policy-setting meeting in
September for signs of a December rate hike.
The futures market perceives a roughly 70-percent chance
that the Fed will lift rates in December, a view that pushed the
benchmark 10-year U.S. Treasury yield to a more than
"Recent data on jobs, manufacturing and services growth have
shown compelling strength that could green light a U.S. rate
hike by the end of the year," said Joe Manimbo, senior market
analyst at Western Union Business Solutions in Washington.
The dollar index, which measures the greenback against six
major currencies, jumped 0.79 percent to 97.691, after
hitting 97.731 - its highest since late July.
The euro fell to more than a two-month low against the
dollar and was last down 0.75 percent at $1.1054.
Against the yen, the dollar was down 0.31 percent at 103.26
Crude oil retreated from one-year highs on concerns a
proposed cut by the world's largest oil exporters might not be
enough to reduce a global supply glut.
The International Energy Agency, the energy watchdog of the
West, said it was unclear how rapidly global oil supply could
fall in line with demand even if Russia and OPEC agreed on a
steep enough cut.
Brent crude oil settled down 73 cents at $52.41 a
barrel and U.S. West Texas Intermediate crude slipped 56
cents to settle at $50.79.
The Dow Jones industrial average fell 238.59 points,
or 1.3 percent, to 18,090.45. The S&P 500 slid 31.52
points, or 1.46 percent, to 2,132.14 and the Nasdaq Composite
lost 93.59 points, or 1.76 percent, to 5,235.09.
The market is in a corrective phase, with overvalued
dividend stocks being sold, said Rahul Shah, chief executive of
Ideal Asset Management.
"If we grind forward like this and you have overvalued
sectors come down and undervalued sectors rise, you could set
the base for a market that could have a strong rally in the
future," Shah said.
In Europe, the pan-regional FTSEurofirst 300 index
fell 0.6 percent to close at 1,342.19. MSCI's
all-country stock index fell 1.28 percent.
Weaker commodity stocks weighed in Europe. The STOXX Oil &
Gas index fell 1.5 percent, making it the region's
second-biggest sectoral loser after the STOXX Basic Resources
index fell 2.1 percent as metal prices retreated.
The 10-year U.S. Treasury note fell 6/32 in price to yield
(Reporting by Herbert Lash; Editing by Nick Zieminski)