Global Stocks Slide On Jobs Data; Oil Slides

Investors in Europe dumped stocks and dove into less risky fixed income securities, pushing a pan-European stock index down 4 percent.

U.S. and European stocks fell on Friday after steep losses in the U.S. labor market sent bond prices higher in Europe and pushed the price of crude below $41 a barrel as the outlook for the global economy darkened.
Investors in Europe dumped stocks and dove into less risky fixed income securities, pushing a pan-European stock index down 4 percent, as investors reeled from data showing 533,000 Americans lost jobs in November, the biggest drop in 34 years.

Oil prices slid more than 5 percent to a four-year low while the dollar climbed against European currencies and the yen rallied on another flight to quality in the face of a U.S. recession that looms as the deepest since 1981.

"Just when you thought that the U.S. economic outlook couldn't get any uglier, it goes ahead and does," said Meny Grauman, an economist at CIBC World Markets in Toronto.

Stocks sold off broadly as investors feared the job losses will cause consumers to cut back spending and sharply reduce corporate earnings.

The energy sector was the biggest casualty on both sides of the Atlantic. Exxon Mobil fell 3.8 percent and Chevron dropped 2.4 percent, the Nos 1 and 3 drags on the Dow. Total slumped 8.9 percent and BP 6.6 percent, the biggest drags on the pan-European FTSEurofirst 300 index.

Banks also were among the biggest drags in Europe, with BNP Paribas falling 7.5 percent and Credit Suisse dropping 5.5 percent.

"When you see such a shocking employment number, you realize the devastating effect that can have on household demand," said Henk Potts, equity strategist at Barclays Stockbrokers in London.

In early afternoon New York trade, the Dow Jones industrial average <.DJI> was down 88.01 points, or 1.05 percent, at 8,288.23. The Standard & Poor's 500 Index <.SPX> was down 7.67 points, or 0.91 percent, at 837.55. The Nasdaq Composite Index <.IXIC> was down 7.36 points, or 0.51 percent, at 1,438.20.

The pan-European FTSEurofirst 300 <.FTEU3> index closed down 4 percent at 793.94 points, and has lost about half its value so far this year.

Euro zone government bond futures rose, pushing the 10-year cash yield below 3 percent and near Thursday's trough of 2.939 percent, the lowest in over 30 years.

The U.S. unemployment rate rose to 6.7 percent in November -- dramatic news that would normally touch off a flurry of safe-haven buying of debt.

But with 10-year euro zone and U.S. yields -- which move in the opposite direction to their prices -- near historic lows, analysts said the near term risk was for market momentum to run out of steam, as a fall in U.S. bonds would suggest.

Investors are reluctant to buy U.S. government debt with yields hovering off their the lowest level in over 50 years.

The benchmark 10-year U.S. Treasury note fell 11/32 in price to yield 2.59 percent. The 2-year U.S. Treasury note was off 4/32 to yield 0.87 percent.

"We're already at (yield) levels we've never seen before. It's just difficult to continue buying Treasuries at these prices," said Kim Rupert, managing director of global fixed income analysis at Action Economics in San Francisco.

November's job losses were the steepest since December 1974, when 602,000 jobs were shed, Labor Department data showed, and were much worse than forecast by analysts polled by Reuters who had predicted a reduction of 340,000 jobs.

The dollar rose against a basket of major currencies, with the U.S. Dollar Index <.DXY> up 0.77 percent at 87.282. Against the yen, the dollar fell 0.05 percent to 92.12.

The euro fell 0.80 percent at $1.2668.

U.S. light sweet crude oil fell $1.96 to $41.71 a barrel.

Many dealers and analysts expect oil prices to soon test the psychologically important $40 level as evidence mounts of a significant decline in oil demand in developed economies.

Spot gold prices fell $15.15 to $750.50 an ounce.

Asian shares edged higher overnight, with the MSCI index of Asian shares outside Japan <.MIAPJ0000PUS> rising 0.2 percent, but trimmed gains to trade lower after the U.S. employment report. The Nikkei average <.N225> fell 0.1 percent.

Source: http://www.javno.com/en/economy/clanak.php?id=211595