Global markets slide on US data

Published Jul 6, 2012

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Stocks on major exchanges extended their losses on Friday and the euro hit 5-week lows after U.S. jobs data for June came in weaker than expected, fueling concerns that Europe's debt crisis is pushing the world's largest economy into low gear.

Prices of oil and copper fell along with those gold as the dollar surged amid a broad flight from risk.

U.S. and German government bond prices leapt, with investors seeking safe havens in U.S. Treasuries and German bunds.

The Labor Department said U.S. non-farm payrolls expanded by just 80,000 jobs in June, falling short of forecasts. A Reuters poll showed the market expecting a growth of 90,000 jobs.

The data raised pressure on the Federal Reserve to do more to boost the economy, and imperiled President Barack Obama's chances of reelection in November.

The 80,000 jobs added in June was “a poor number and a very political number and it will not sit well with the market,” said Jeff Savage, regional chief investment officer for Wells Fargo Private Bank in the Northwest in Portland, Oregon.

“There is no question that the QE3 conversation becomes very alive in the coming days and weeks,” he said, referring to a third round of quantitative easing since 2008 that markets were expecting from the Fed. The first two rounds of QE involved large-scale Treasuries buying, aimed at lowering long-term interest rates.

Futures traders added to bets that the Fed will keep short-term interest rates near zero until the end of 2014.

Fed fund futures, tied to the overnight lending rate between banks, ticked up after the jobs report, signaling traders see the Fed first hiking rates in the fourth quarter of 2014, either at its October or its December meeting of that year.

The Dow Jones industrial average was down 126.32 points, or 0.98 percent, at 12,770.35. The Standard & Poor's 500 Index was down 13.36 points, or 0.98 percent, at 1,354.22. The Nasdaq Composite Index was down 29.03 points, or 0.98 percent, at 2,947.09.

European shares fell further after the jobs data, down nearly 0.8 percent on the day, having been 0.2 percent lower beforehand. World stocks fell 1 percent.

The euro extended losses to fall to a fresh five-week low against the dollar, sliding nearly 0.5 percent to $1.2332 after falling as low as $1.2317 earlier.

Monetary policy loosening by a trio of major central banks failed to impress investors on Friday, pushing Spanish borrowing costs back up to unsustainable levels reached before last week's EU summit took measures designed to ease pressure on them.

China, the euro zone and Britain all loosened monetary policy on Thursday, signalling growing alarm about the world economy. But to little avail.

The 19-commodity Thomson Reuters-Jefferies CRB index was headed for its sharpest loss in a week as oil and copper prices fell about 2 percent each.

Gold slid more than 1 percent in choppy trade as investors turned to the perceived safety of the dollar. The spot price of gold, which tracks trades in bullion, was at $1,588.19 from $1,604.33 at Thursday's close.

U.S. Treasuries' benchmark 10-year note yields were at 1.5559 percent, their lowest levels in four days. Safe haven German Bund futures hit a session high. -Reuters

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