Exclusive - DoubleLine's Gundlach says U.S. equity markets face another major leg down

By Jennifer Ablan NEW YORK (Reuters) - DoubleLine Capital co-founder Jeffrey Gundlach, widely followed for his investment calls, warned on Monday that the U.S. equity markets face another round of selling pressure. "The U.S. stock market is in a mode of uncertainty, at best," Gundlach said in a telephone interview with Reuters. "You don't correct all of this in three days. The market is wounded and it takes time for people to get around to feeling good again." U.S. stocks slumped on Monday, with all three major indexes down more than 3 percent in late trading, with volatility the theme of the day. Stocks had been in a virtual free-fall in early trading, with the Dow Jones briefly plunging more than 1,000 points in its biggest point drop ever. A stunning recovery pared losses before selling resumed. Gundlach, who runs Los Angeles-based DoubleLine Capital, which had $76 billion (£48.2 billion) in assets under management as of June 30, said China's currency devaluation "was kind of the exclamation point of corroborating the fact that global growth is subpar." The plunge in commodity prices had been signalling a slowdown in global economic growth, led by China, the world's second biggest economy, he said. "China is supposed to be the engine of global growth," Gundlach said. "The real key here is if China's 7 percent growth rate is weaker than that. What if it's around 2 percent, which means global growth could very well be 1 percent? There is a knock-on effect and every country would have to downgrade their growth projections if China is really that weak." Gundlach said he is also concerned about redemptions in risk-asset-based exchange-traded funds and mutual funds such as high-yield "junk" bond ETFs. Last year, Gundlach correctly predicted that Treasury yields would fall, not rise as many others had forecast, because inflationary pressures were non-existent and technical factors, including ageing demographics, were at play. Since the spring, Gundlach has said repeatedly that he believed the U.S. Federal Reserve would probably not raise interest rates this year, in part because of a lack of wage inflation. On Monday, Gundlach said: "Global growth is not going to be strengthened by this global market turmoil." The DoubleLine Total Return Bond Fund, the firm's largest portfolio by assets, which is run by Gundlach, had net inflows in July of $390.4 million, marking the 18th consecutive month it attracted new money. It has $47.2 billion in assets and invests primarily in mortgage-backed securities. (Reporting by Jennifer Ablan; Editing by Chris Reese and Leslie Adler)