GLOBAL MARKETS-Shares, bonds slide on U.S. economic data
* Data on U.S. jobs market, inflation buoy economic outlook * Brent crude near $111 a barrel on unrest in Egypt * U.S. Treasuries yields rise to their highest in two years * Dollar climbs after drop in U.S. weekly jobless claims By Herbert Lash NEW YORK, Aug 15 (Reuters) - Global equity markets swooned and bond prices slid on Thursday after slowly improving U.S. jobs data and gains in consumer prices added weight to the view the Federal Reserve will soon begin to trim its massive bond-buying program. The number of Americans filing new claims for jobless benefits fell to an almost six-year low last week while a rise in consumer prices indicated that a downward drift in prices that could destabilize a sluggish economy was over. Stocks on Wall Street fell more than 1 percent after the government data was released. U.S. Treasuries yields rose to their highest level in two years, with the benchmark 10-year note topping 2.8 percent for the first time since August 2011. A measure of global equity markets slid more than 1 percent, as did a major pan-European stock index. Britain's benchmark FTSE 100 index fell 1.6 percent, though other regional country indexes in Europe posted smaller declines. "It's a set of data that will add to the September tapering conversation," Tom Porcelli, chief U.S. economist at RBC Capital Markets in New York, said of the prospect when the Fed begins to reduce its bond purchases. "The bottom line is that the tapering will probably happen either in September or October, but it will be a gradual one." The Fed's next policy meeting will be held on Sept. 17-18. Talk about the timing of an end to the Fed's bond buying has dominated security markets because it is likely to boost U.S. Treasury yields and support demand for the dollar. A reduction in stimulus could also hurt shares and commodities, which have gained as world central banks have primed markets with liquidity. The Dow Jones industrial average was down 196.20 points, or 1.28 percent, at 15,141.46. The Standard & Poor's 500 Index was down 20.51 points, or 1.22 percent, at 1,664.88. The Nasdaq Composite Index was down 49.74 points, or 1.36 percent, at 3,619.53. Declining shares outpaced advancing stocks by more than 7 to 1 on the New York Stock Exchange, and by 4 to 1 on Nasdaq. MSCI's all-country world index fell 1.05 percent, while the FTSEurofirst 300 of leading European shares fell 1.01 percent to a close of 1,227.79. Financial markets have largely positioned for the Fed to start paring its monthly $85 billion spending on bonds in September but conflicting signals from policymakers, and muted inflation data, lately have undermined this conviction. On Wednesday, St. Louis Fed President James Bullard cited the inflation outlook when he said he hadn't decided whether next month's policy meeting would be too soon to curb the asset purchases, known as quantitative easing. "The data continues to improve and impress the marketplace, and I think the data will continue in this direction," said Charles Comiskey, head of Treasuries trading at Bank of Nova Scotia in New York. "Then the question becomes not whether they are going to taper in September, but how much they will taper." Corporate news pointed to a sluggish American economy. Wal-Mart Stores Inc cut its revenue and profit forecasts for the year as U.S. shoppers were pinched by higher payroll taxes and pricier gasoline. Wal-Mart shares fell 2.4 percent to $74.58. Cisco Systems said on Wednesday it will shed 4,000 jobs, or 5 percent of its workforce, to reduce costs. Shares declined 6.5 percent to $24.67 as a slew of brokerages cut their price targets on the stock. An improved economic outlook for the euro zone prompted investors to dump safe-haven German Bunds, pushing yields to their highest since March 2012. Data on Wednesday confirmed the euro zone emerged from a long recession in the second quarter, and business surveys earlier in the week raised expectations the recovery might gather pace in the second half of the year. On Thursday, 10-year German Bund yields rose as high as 1.906 percent, while the 10-year U.S. Treasury note was down 18/32 in price to yield 2.7773 percent after earlier yielding as much as 2.823 percent. The dollar climbed to a near two-week high against the euro and a more than one-week high against the yen, before the greenback retreated. The euro was last up 0.08 percent at $1.3265 while the dollar fell 0.23 percent to 97.90 yen. Brent oil prices climbed above $111 per barrel to a four-month high on fears that escalating violence in Egypt could affect the Suez Canal or spread in the Middle East, where some supplies are already disrupted. Front-month September Brent, which expires on Thursday, was trading 79 cents higher at $110.99 a barrel after earlier jumping by over a dollar to $111.53, its highest level since April 2. U.S. oil rose 62 cents to $107.47. "Disruptions at the Suez Canal are unlikely, but markets never move on what's likely. They move on fear. If people are fearful about supply, they buy even if the market is fundamentally well supplied," said Michael Hewson, an analyst at CMC Markets.
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