Global stocks, oil slump on weak jobs data

Last Updated: Fri, May 04, 2012 19:10 hrs

By Herbert Lash

NEW YORK (Reuters) - Global stocks swooned and crude oil tumbled on Friday after a weak U.S. jobs report and data that suggested a deeper recession across the euro zone than previously thought dented sentiment.

Major U.S. and European stock indexes fell more than 1 percent, U.S. crude oil slumped about 4 percent and government debt prices jumped after the Labor Department said American employers cut back on hiring in April more than expected.

The week loomed as the worst this year for stocks on Wall Street, with energy leading the decline. The S&P energy index of 44 gas and oil-related companies fell 2.0 percent on fears a worsening economy would sap demand for fuel.

Just 115,000 workers were added to payrolls last month, or 55,000 less than economists expected. While the unemployment rate fell one-tenth of a point to 8.1 percent, a three-year low, that was only because the workforce shrank as people retired or stopped seeking work.

The third straight monthly decline in hiring growth spurred concerns that the U.S. economy is losing momentum and doused hopes that a stretch of strong winter hiring had signaled a turning point for the U.S. recovery.

"The latest report mirrors the softening of first-quarter GDP," said Thanos Bardas, a portfolio manager at Neuberger Berman in Chicago, which manages nearly $200 billion in assets. "This shows just how painfully slow the U.S. economy is growing."

The Dow Jones industrial average was down 170.10 points, or 1.29 percent, at 13,036.49. The Standard & Poor's 500 Index was down 22.07 points, or 1.59 percent, at 1,369.50. The Nasdaq Composite Index was down 59.76 points, or 1.98 percent, at 2,964.54.

The U.S. 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 percent at 1,027.15 points, and the Euro STOXX 50 index fell 1.7 percent to 2,248.34, despite strong corporate earnings from Royal Bank of Scotland, BNP Paribas and Lafarge.

MSCI's all-country world equity index fell 1.5 percent to 321.46.

Some analysts said the jobs report, which followed weaker-than-expected services sector data this week, will fuel hopes for a third round of stimulus, or quantitative easing, by the Federal Reserve to keep rates low and to 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 U.S. currency down 0.41 percent at 79.86 yen.

The U.S. dollar index rose 0.36 percent at 79.509.

The euro was down 0.52 percent at $1.3082.

The benchmark 10-year U.S. Treasury note rose 15/32 in price to yield 1.88 percent, and the 30-year U.S. Treasury bond gained almost a full point in price to yield 3.07 percent.

Benchmark Brent crude in London fell to three-month lows around $113 a barrel, on course for its steepest weekly fall since December, after the weak U.S. jobs report.

Brent futures settled down $2.82 at $113.26 a barrel, lows last seen in early February.

U.S. crude settled down $4.05 at $98.49 a barrel.

"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.

(Additional reporting by Richard Leong, Ryan Vlastelica, Julie Haviv, Matthew Robinson and Jonathan Leff, Reporting by Herbert Lash, Editing by James Dalgleish and Dan Grebler)

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