World stocks fall on fading optimism

By Herbert Lash

NEW YORK (Reuters) - Global stocks reversed course on Monday and fell as fading optimism over the global economy and renewed concerns about banks prompted investors to seek the safety of the U.S. dollar.

Oil prices fell to almost $51 a barrel, tracking the decline in stock prices, while gold prices fell almost 3 percent with the rise in the dollar and weaker oil.

Copper ended down for the first time in five sessions, falling 2 percent to settle at $1.9590 a pound, as a slide in stocks rekindled concerns about demand for industrial metals and helped offset optimism over Chinese buying.

Renewed worries about the troubled banking sector led investors to book gains after a sharp four-week global stock rally, while the potential collapse of IBM's takeover of Sun Microsystems bruised sentiment in the technology sector.

Sun fell 22.5 percent and shares of International Business Machines (IBM.N) slipped 0.65 percent, making it one of the biggest drags on the Dow.

Shares of big manufacturers, whose fortunes are closely linked to the economic cycle, were among the top laggards, with Caterpillar (CAT.N) down 2.6 percent to $31.31.

The biggest drag on the Dow was JPMorgan Chase (JPM.N), which fell 3.7 percent to $28.20.

Bank shares stumbled after veteran banking analyst Mike Mayo of Calyon Securities initiated coverage on several large banks and said the sector's problems still have further to run and government action may not help as much as expected.