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GLOBAL MARKETS-Stocks' worst month since Sept; Treasury yield at record low
* Sharpest monthly loss since Sept for world stocks
* Weak U.S. data depresses markets
* Euro gives back early gains
* U.S. Treasury yields set lows
By Barani Krishnan
NEW YORK, May 31 (Reuters) - Stocks were headed on Thursday to their worst month since September and commodities were also battered after disappointing U.S. economic data and worries over Europe fueled demand for safe-havens and pushed Treasury debt yields to record lows.
The euro hit a 23-month low, depressed by concerns over Spain and its troubled banks after expectations of an Irish vote in favor of Europe's fiscal pact initially buoyed the currency. Concerns over Friday's U.S. employment report for May also cast a shadow over trading.
Equity markets across the world were on course to their sharpest monthly loss in eight months.
Wall Street's S&P 500 was down 7 percent for May and heading toward the 1,300 level it has defended since mid-January. European stocks were also down 7 percent while global equities showed a 10 percent drop for the month.
Investors were dismayed by a slew of bearish U.S. data, including readings on the labor market, a report on overall economic growth and manufacturing in the U.S. Midwest that pointed to a slowdown in the recovery.
"There's a lot of instability in the world, and along with the weak economic signals there's going to be significant volatility that I don't expect to end anytime soon," said Don Steinbrugge, managing partner of Agecroft Partners in Richmond, Virginia.
"Today's data reduces expectations for tomorrow, and if that number is weak it will definitely cause a big sell-off tomorrow."
A jobs report from private U.S. payrolls processor ADP showed that private employers created 133,000 jobs in May, fewer than the expected 148,000, while new claims for unemployment benefits rose by 10,000 for the fourth straight weekly increase.
Around 12:30 p.m., the Dow Jones industrial average edged into positive territory, up 2.80 points, or 0.02 percent, at 12,422.66. The Standard & Poor's 500 Index was down 2.69 points, or 0.20 percent, at 1,310.63. The Nasdaq Composite Index was down 20.59 points, or 0.73 percent, at 2,816.77.
European stocks, tracked by the FTSEurofirst 300 index, were down 0.7 percent. Global equities, measured by the MSCI index, shed 0.7 percent.
NO ECB HELP
Concerns over Europe's debt crisis and the lack of a clear policy response have been rising since Spain unveiled unconvincing plans to recapitalize nationalized lender Bankia , raising the possibility it could need outside help.
In Europe, ECB President Mario Draghi ruled out hopes that the central bank would step in to ease the pressure in financial markets as EU leaders tried to agree on how to tackle structural problems at the root of the debt crisis.
"Can the ECB fill the vacuum of lack of action by national governments on fiscal growth? The answer is 'No,'" Draghi told the European Parliament. "Can the ECB fill the vacuum of the lack of action by national governments on the structural problem? The answer is 'No.'"
Spain's 10-year bond yields were around 6.6 percent , not far from Wednesday's euro-era high of 6.79 percent and close to the crucial 7 percent mark, which has led to troubled nations like Portugal and Ireland needing bailouts.
The flight from Spanish debt and Italian bonds, which are under threat of contagion from Spain, has pushed up demand for the safety offered by German government paper. The yield on Germany's two-year bonds traded just above zero percent on Thursday, while benchmark 10-year Bund yields hovered around their record low of about 1.25 percent.
The benchmark 10-year U.S. Treasury note was up 15/32, with the yield at 1.5662 percent -- lower than Wednesday's 1.6 percent levels, which already marked a 60-year bottom.
On the currency front, the euro was last at $1.2358 to the dollar after plumbing a 23-month low at $1.2335. Against the yen, the euro fell to its lowest level since December 2000, reaching 96.48 yen.
May was also turning out to be one of the weakest months in years for commodities.
Oil's benchmark Brent crude in London traded at around $101 per barrel, heading for a 15 percent loss on the month -- its worst monthly performance since December 2008.
Gold was near flat at around $1,563 an ounce, although it was on target for a 6 percent monthly drop that would mark its worst May in 30 years. Copper futures in London hit 5-month lows at below $7,438 a tonne.
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