GLOBAL MARKETS-Shares, dollar hit by U.S. jobs data; bonds rally

Fri Apr 5, 2013 12:26pm EDT

* U.S. March payroll growth 88,000, less than forecast

* Wall Street falls 1 pct, European shares down 2 pct

* Dollar index falls 0.4 percent, Treasuries rally

By Wanfeng Zhou

NEW YORK, April 5 (Reuters) - Major stock markets tumbled, the dollar fell and U.S. Treasury securities prices rallied on Friday, after a weaker-than-expected jobs report added to fears the U.S. economic recovery was losing steam.

Brent crude oil fell to a five-month low as bleak U.S. jobs data and bulging inventories dimmed the outlook for economic growth and fuel demand. Safe-haven gold prices rose.

U.S. employers hired at the slowest pace in nine months in March, adding just 88,000 nonfarm jobs, the Labor Department said, below an expected 200,000. The jobless rate ticked a tenth of a point lower to 7.6 percent, but largely due to people dropping out of the work force.

"The report will fuel concerns about another spring swoon for the economy, the adverse impact of Congressional dysfunction and, more generally, the weak underlying dynamism of the economy," said Mohamed El-Erian, co-chief investment officer at Pacific Investment Management Company.

The report followed a string of disappointing data this week on activity in the U.S. manufacturing and services sectors and on private sector hiring, raising concern the recent rally in equities has outrun the economic fundamentals.

Outperforming U.S. and European markets, Japanese shares climbed to near five-year highs overnight, a day after the Bank of Japan took bold monetary easing to fight deflation. Tokyo's Nikkei stock average jumped 4.7 percent to above 13,000 points for the first time since August 2008.

The unprecedented move drove the yen to its weakest in 3-1/2 years against the dollar and benchmark 10-year Japanese government bond yields to a record low of 0.315 percent.

The MSCI world stocks index slipped 0.5 percent to 354.75 points.

U.S. stock indexes fell about 1 percent. The benchmark S&P has shed 1.7 percent this week, on track for its worst weekly decline of the year.

The Dow Jones industrial average dropped 114.91 points, or 0.79 percent, to 14,491.20. The Standard & Poor's 500 Index fell 13.94 points, or 0.89 percent, to 1,546.04. The Nasdaq Composite Index lost 35.60 points, or 1.10 percent, to 3,189.38.

European shares tumbled 1.5 percent, the biggest daily fall of the year, to close at 1162.76 points.

BONDS RALLY

The dollar fell 0.4 percent against a basket of major currencies to 82.375, on expectations the Federal Reserve will continue its bond-buying program, or quantitative easing. The euro rose 0.7 percent to $1.3023.

"The market is assured that the Fed will not be taking its foot off the QE gas pedal anytime soon," said Douglas Borthwick, managing director at Chapdelaine Foreign Exchange in New York.

"This number is seeing follow-through in dollar weakness and I expect that to continue against all countries who are not embarking on QE of their own."

The dollar was last up 0.6 percent at 96.87 yen, having risen to 97.26, the strongest since August, 2009.

The euro rallied 1.2 percent to 126.13 yen.

U.S. Treasuries rallied and yields fell to their lowest levels of the year, after the jobs data. Weaker global equity markets, the Bank of Japan's monetary stimulus program, and escalating tension in the Korean peninsula also encouraged investors to buy bonds.

The benchmark 10-year Treasury note was 23/32 higher after the report, easing its yield to 1.6855 percent.

The price of the 30-year Treasury bond extended an early gain to more than two points, pushing its yield down to 2.85 percent from 2.99 percent late on Thursday.

"A ton of traders must have fallen out of their seats this morning after seeing this weak jobs report," said Thomas DiGaloma, managing director at Navigate Advisors LLC in Stamford, Connecticut.

German Bund futures extended gains to hit their highest level since June 2012 at 146.54, up 58 ticks on the day.

Brent crude fell $1.69 to $104.65 a barrel. U.S. crude dropped 91 cents to a low of $92.35.

Spot gold rose to $1,567 an ounce from $1,552.71.

Comments (0)
This discussion is now closed. We welcome comments on our articles for a limited period after their publication.