Stocks, dollar fall on weak US jobs data

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Published Apr 6, 2013

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New York - Major stock markets tumbled and the dollar fell on Friday, after a weaker-than-expected jobs report added to fears the US economic recovery may be losing steam, driving a bid for safety that boosted prices of US Treasury securities and gold

Brent crude oil fell to an eight-month low as the bleak US jobs data dimmed the outlook for fuel demand in the world's largest oil consumer.

US employers hired at the slowest pace in nine months in March, adding just 88 000 nonfarm jobs, the Labor Department said, below an expected 200 000. The jobless rate ticked a tenth of a point lower to 7.6 percent, but the drop was largely due to people dropping out of the work force.

“The report will fuel concerns about another spring swoon for the economy, the adverse impact of Congressional dysfunction, and more generally, the weak underlying dynamism of the economy,” said Mohamed El-Erian, co-chief investment officer at Pacific Investment Management Company.

The report followed a string of disappointing data this week on activity in the US manufacturing and services sectors and on private-sector hiring, raising concern the recent rally in equities has outrun economic fundamentals.

Japanese shares climbed to near a five-year high overnight, with the market in Tokyo closing before the US jobs data was announced, a day after the Bank of Japan took bold monetary easing measures to fight deflation. Tokyo's Nikkei stock average jumped 4.7 percent, topping 13,000 points for the first time since August 2008.

The yen sank to its weakest level in more than 3-1/2 years against the dollar, and benchmark 10-year Japanese government bond yields fell to a record low of 0.315 percent. The yen, down 3.5 percent this week against the dollar, posted its worst week since December 2009. Against the euro, the yen saw its largest weekly loss since November 2008, down about 5 percent.

The MSCI world stocks index slipped 0.3 percent on the day to 355.36 points.

US stocks ended their worst week this year with losses on Friday after the jobs data undermined confidence in the economy and first-quarter earnings. The US quarterly, corporate earnings season will start up next week.

The Dow Jones industrial average dropped 40.86 points, or 0.28 percent, to close at 14,565.25. The Standard & Poor's 500 Index dropped 6.70 points, or 0.43 percent, to end at 1,553.28. The Nasdaq Composite Index dropped 21.12 points, or 0.66 percent, to 3,203.86.

For the week, the Dow fell 0.1 percent, the S&P lost 1 percent and, the Nasdaq dropped 1.9 percent.

European shares tumbled 1.5 percent, the biggest daily fall of the year, to close at 1,162.21 points.

The dollar fell 0.2 percent against a basket of major currencies to 82.497, on expectations the Federal Reserve will continue its bond-buying program, known as quantitative easing. The euro rose 0.6 percent to $1.3004.

“The market is assured that the Fed will not be taking its foot off the QE gas pedal anytime soon,” said Douglas Borthwick, managing director at Chapdelaine Foreign Exchange in New York.

“This number is seeing follow-through in dollar weakness, and I expect that to continue against all countries who are not embarking on QE of their own.”

The dollar was last up 1.3 percent at 97.57 yen, having risen to 97.83, the strongest since June 2009. The euro rallied 1.8 percent to 126.85 yen.

US Treasuries rallied and yields fell to their lowest levels of the year. Weaker global equity markets, the Bank of Japan's monetary stimulus program, and escalating tension in the Korean peninsula also encouraged investors to buy bonds.

The benchmark 10-year Treasury note was 17/32 higher after the report, driving its yield down to 1.706 percent.

The price of the 30-year Treasury bond rose 2-22/32, pushing its yield down to 2.858 percent from 2.99 percent late on Thursday.

German Bund futures extended gains to hit their highest level since June 2012 at 146.54, up 58 ticks on the day.

Brent crude fell $2.22 to settle at $104.12 a barrel. US crude dropped 56 cents to settle at $92.70.

Spot gold rose to $1,578 an ounce from $1,552.71. - Reuters

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