March 25, 2019 / 3:11 PM / 2 months ago

GLOBAL MARKETS-World stocks sink on economic worries, U.S. yields fall

* Global stock gauge hits near two-week low, Wall Street down

* Survey shows surprise rise in German business morale

* Benchmark U.S. yields near one-year lows as Fed in focus

* Oil prices hit by worries of sharp economic slowdown (Updates with open of U.S. markets; changes dateline from LONDON)

By Lewis Krauskopf

NEW YORK, March 25 (Reuters) - World stocks sold off sharply for a second straight session on Monday on persistent concerns over global economic growth, while benchmark 10-year U.S. Treasury yields held near more than one-year lows.

MSCI’s gauge of stocks across the globe shed 0.66 percent, as Wall Street’s main indexes opened lower.

Following a steep sell-off in stocks on Friday, investors were still digesting weak U.S. factory data last week that prompted an inversion of the U.S. Treasury yield curve, which is widely seen as an indicator of an economic recession.

“Investors are just a little worried about the rest of the year as far as growth,” said Chris Gaffney, president of world markets at TIAA Bank. “There have been lots of signs that central banks in particular think that the global economy is slowing down.”

On Wall Street, the Dow Jones Industrial Average fell 66.95 points, or 0.26 percent, to 25,435.37, the S&P 500 lost 8.77 points, or 0.31 percent, to 2,791.94 and the Nasdaq Composite dropped 40.64 points, or 0.53 percent, to 7,602.02.

Major U.S. indexes on Friday posted their biggest one-day declines since Jan 3.

The pan-European STOXX 600 index lost 0.64 percent.

In one economic bright spot, a survey showed German business morale improved unexpectedly in March after six consecutive drops, with the results supporting European shares and German bond yields.

Benchmark U.S. 10-year notes last rose 9/32 in price to yield 2.4248 percent, from 2.455 percent late on Friday, when the yield fell as low as 2.418 percent, its lowest since January 2018.

On Friday, the spread between yields on three-month Treasury bills and 10-year notes fell below zero for the first time since 2007. Such an inversion is a warning sign about the economy. On Monday, that yield curve was still slightly inverted.

Investors were evaluating last week’s dovish pivot by the U.S. Federal Reserve, in which the central bank stunned investors by abandoning projections for any interest rate hikes this year.

“We’re examining yield curve relationships in an environment where the Fed still has enormous control over the long end of the curve, given how much they own on their balance sheet, and we’re dealing with a very accommodative global policy regime as well,” said Tom Simons, a money market economist at Jefferies in New York.

The dollar index, which measures the greenback against a basket of currencies, fell 0.2 percent, with the euro up 0.11 percent to $1.1324.

Oil prices fell, with concerns of a sharp economic slowdown overshadowing support from tighter supply due to OPEC’s production cuts and U.S. sanctions on Iran and Venezuela.

U.S. crude fell 1.27 percent to $58.29 per barrel and Brent was last at $66.59, down 0.66 percent on the day.

Additional reporting by Karen Brettell in New York and Karin Strohecker in London; Editing by Hugh Lawson and Susan Thomas

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