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Global stocks swooned and crude oil tumbled on Friday after a weak US jobs report and economic data that pointed to a deeper recession across the euro zone than previously thought.
Major US and European stock indexes fell more than 1 per cent, crude oil slumped about 4 per cent and government debt prices jumped after the labour department said US employers cut back on hiring in April more than expected.
Employers added just 115,000 workers to payrolls last month, or 55,000 less than economists expected. The unemployment rate fell one-tenth of a point to 8.1 per cent, a three-year low, but only because the workforce shrank as people retired or stopped looking for a job.
The third straight monthly decline in hiring growth spurred concerns that the US economy is losing momentum and doused hopes that a stretch of strong winter hiring had signaled a turning point for the US recovery.
“The US economy is not growing fast enough to improve the job market. When all is said and done that is the most important statistic,” said Joseph Trevisani, chief market strategist at Worldwide Markets in Woodcliff Lake, New Jersey.
Oil fell to three-month lows around $112 a barrel, on course for its steepest weekly fall since December, after the weak US jobs report. Brent crude oil futures lost $3.80 to $112.28 a barrel, lows last seen in early February. US crude fell $4.51 to $98.03 a barrel.
The Dow Jones industrial average was down 164.16 points, or 1.24 per cent, at 13,042.43. The Standard & Poor’s 500 Index was down 21.27 points, or 1.53 per cent, at 1,370.30. The Nasdaq Composite Index was down 58.14 points, or 1.92 per cent, at 2,966.16.
The US jobs data added to the gloomy tone from Europe, where purchasing managers’ indexes, primarily covering services, suggested a recession across the euro zone could extend to mid-year and be deeper than previously thought. Markit’s Eurozone Services PMI, which gauges business activity over a month, came in at 46.9 for April, sharply lower than 49.2 in March. Anything below 50 signifies contraction.
The JPMorgan Global Purchasing All-Industry Output Index of about 20 countries showed declines in April from March.
In Europe, the pan-European FTSEurofirst 300 index closed down 1.7 per cent to 1,027.15 points, and the Euro STOXX 50 index fell 1.7 per cent to 2,249.27, despite strong corporate earnings from Royal Bank of Scotland, BNP Paribas and Lafarge.
MSCI’s all-country world equity index fell 1.5 per cent to 321.58. Some analysts said the jobs report, which followed weaker-than-expected services sector data this week, will fuel expectations of a third round of stimulus, or quantitative easing, by the Federal Reserve to keep rates low and foster growth.
“The headline disappointment increases the likelihood that (Fed Chairman Ben) Bernanke will move forward with QE3 later this summer in an attempt to further bolster employment growth,” said Michael Woolfolk, senior currency strategist at BNY Mellon in New York.
The dollar slipped against the yen in volatile trading after the payrolls number, with the US currency down 0.41 per cent at 79.86 yen.
The US dollar index rose 0.37 per cent at 79.512. The euro was down 0.43 per cent at $1.3094.
The benchmark 10-year US Treasury note rose 15/32 in price to yield 1.88 per cent, and the 30-year US Treasury bond gained 25/32 in price to yield 3.08 per cent.
“We are locked in this sluggish growth environment,” said Robert Vanden Assem, head of investment grade fixed income at PineBridge Investments in New York, which manages about $67 billion in assets.