* U.S. crude settles below $30/barrel
* Major U.S. stock indexes down about 2 pct
* European stocks drop 2 pct as BP , UBS slump
* U.S. Treasury yields fall to 9-month lows
(Updates with U.S. afternoon trading)
By Lewis Krauskopf
NEW YORK, Feb 2 (Reuters) - U.S. and European stock indexes
fell sharply on Tuesday and buyers sought safe-haven government
bonds after another tumble in depressed oil prices.
Benchmark Brent crude LCOc1 settled down 4.4 percent,
while U.S. crude CLc1 fell 5.5 percent, settling below $30 a
barrel. Hopes faded for a deal between oil-producing nations to
curb a massive supply glut.
The prolonged crude slide was reflected in results from oil
majors BP BP.L , whose shares slumped after it posted a $6.5
billion loss for 2015, and Exxon (N:XOM) XOM.N , which posted its
smallest quarterly profit in more than a decade.
The major U.S. stock indexes all were down about 2 percent
in afternoon trading, led lower by energy shares, while the
pan-European FTSEurofirst index .FTEU3 also dropped 2 percent.
Oil's renewed drag on equities comes as some investors
recently have expressed hope that other markets were beginning
to diverge from the performance of the beaten-down commodity.
"We still haven't broken the correlation between oil and
equities and we are yet to find a bottom in oil prices," said
Jeff Carbone, co-founder of Cornerstone Financial Partners in
Charlotte, North Carolina.
The Dow Jones industrial average .DJI was off 284.28
points, or 1.73 percent, at 16,164.9, the S&P 500 .SPX was
down 34.35 points, or 1.77 percent, at 1,905.03 and the Nasdaq
Composite .IXIC dropped 96.67 points, or 2.09 percent, at
4,523.70.
"There is a lot of nervous, short-term money in this market
that shouldn't be in the market," said Jake Dollarhide, chief
executive officer of Longbow Asset Management in Tulsa,
Oklahoma. "The sooner we get it out, the sooner we get
capitulation, the sooner we can go back to a normal market."
The first results of the U.S. presidential primary season in
Iowa also could be creating greater uncertainty for investors
because there were no clear winners, said Rick Meckler,
president of LibertyView Capital Management in Jersey City, New
Jersey.
U.S. Senator Ted Cruz of Texas edged businessman Donald
Trump in the Republican race, while on the Democratic side,
former Secretary of State Hillary Clinton won by a razor-thin
margin against U.S. Senator Bernie Sanders of Vermont.
European equities were also dragged lower by Swiss bank UBS
UBSG.VX , whose shares fell 6.8 percent after it reported a
surprise outflow of funds from its flagship wealth management
business.
MSCI's 46-country All World share index .MIWD00000PUS fell
1.7 percent.
U.S. Treasury yields fell to nine-month lows on safety
buying as oil prices resumed their slide.
Benchmark 10-year notes US10YT=RR were up 28/32 in price
to yield 1.8689 percent, down from 1.966 percent late on Monday.
"I think the reaction in the bonds is greater than you would
think from the stimulus of oil and the stock market," said Lou
Brien, a market strategist at DRW Trading in Chicago. "Part of
it is, maybe people started leaning the wrong way last week if
they thought we'd seen the bottom in crude and stocks."
Euro zone yields fell as European Central Bank chief Mario
Draghi confirmed his commitment to review monetary policy next
month.
The U.S. dollar index, which measures the greenback against
a basket of six major currencies, fell 0.14 percent, while the
euro EUR= was up 0.25 percent against the dollar.
"The risk-off bias of the marketplace... typically favors
yen and euro over the dollar," said Richard Franulovich, senior
currency strategist at Westpac in New York.
(Additional reporting Karen Brettell and Sam Forgione in New
York, and Tanya Agrawal in Bengaluru; Editing by Nick Zieminski
and Dan Grebler)