GLOBAL MARKETS-Stocks, euro slide on worries over U.S. jobs

Fri Jul 6, 2012 9:18pm IST

Related Topics

* U.S. economy adds 80,000 jobs in June, less than expected

* Pressure grows on Fed to act

* Stocks deepen losses after data, commodities fall too

* Dollar rises in broad risk flight as euro hit 5-week low

* U.S. Treasury, German bund prices up in safe-haven bid

By Barani Krishnan

NEW YORK, July 6 (Reuters) - Stocks on major exchanges fell 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 deepening a slowdown in the U.S. economy.

Expectations rose that the Federal Reserve would have to resort to more monetary easing to revive U.S. growth. But that did not stop the dollar from surging amid the flight from risk.

Oil and copper prices fell, along with gold. 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. nonfarm payrolls expanded by just 80,000 jobs in June, falling short of forecasts. A Reuters poll showed the market expected 90,000 additional jobs.

"People were looking for something better, some indicator that may show we're crawling out of this trough," said Nigel Gault, chief U.S. economist at IHS Global Insight. "But everything here says we're still in it."

The data raised pressure on the Fed to launch a third round of quantitative easing. The first two rounds involved large-scale Treasuries buying, aimed at lowering long-term interest rates.

"After this, we can expect some Fed action at their next meeting, said Tim Ghriskey, chief investment officer of Solaris Group in Bedford Hills, New York. "There is the anticipation but at the same time, we know that the Fed is running out of weapons."

The next meeting of the Federal Reserve's monetary policy committee is scheduled for July 31-Aug. 1.

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 that traders see the Fed first hiking rates in the fourth quarter of 2014, either at its October or its December meeting.

Two hours after the open, the Dow Jones industrial average was down 178.99 points, or 1.39 percent, at 12,717.68. The Standard & Poor's 500 Index was down 17.34 points, or 1.27 percent, at 1,350.24. The Nasdaq Composite Index was down 47.11 points, or 1.58 percent, at 2,929.01.

European shares fell further after the jobs data, down 1.0 percent on the day, having been 0.2 percent lower beforehand. World stocks fell 1.2 percent.

The euro extended losses to a five-week low against the dollar, sliding nearly 0.8 percent to $1.2298 after falling as low as $1.2295.

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

China, the euro zone and Britain all loosened monetary policy, signaling 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 more than 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 was at $1,585.24 per ounce, down from $1,604.33 at Thursday's close.

Benchmark U.S. 10-year Treasury note yields were at 1.5457 percent, their lowest in four days, and safe-haven German Bund futures hit a session high.

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