* Weaker-than-expected ISM report adds to emerging market
* Wall Street, European stocks fall more than 1 percent
* U.S. Treasury yields at lows last seen in November
* Dollar slips on weak ISM reading
By Herbert Lash
NEW YORK, Feb 3 A weaker-than-expected report on
U.S. factory activity on Monday pushed global equity markets and
the dollar lower, while adding to pressure on currencies and
other assets in emerging markets.
U.S. stock indexes added to losses, the dollar fell to its
lowest against the Japanese yen since late November and the
yield on the benchmark 10-year U.S. Treasury note fell to its
lowest since early November after release of the ISM factory
Emerging market stocks extended a two-week selloff as weak
Chinese manufacturing and services data weighed, while the
Turkish lira and South African rand weakened after policymakers
poured cold water on expectations of higher local interest
MSCI's all-country world equity index fell
1.36 percent while the pan-European FTSEurofirst 300 index
of leading regional shares closed down 1.4 percent.
MSCI's emerging markets index fell 1.1 percent to
its lowest since August, a rate that was less than the fall in
developed markets. Still, the EM index is down 7.5 percent so
far in 2014, compared with a 5 percent drop in the S&P 500.
U.S. manufacturing grew at a substantially slower pace in
January as new order growth plunged the most in 33 years,
driving overall factory activity to an eight-month low, the
Institute for Supply Management said.
ISM's index of U.S. factory activity fell to 51.3 last month
- its lowest since May - from a revised 56.5 in December. The
reading was well below a median forecast of 56 in a Reuters poll
of economists. Readings above 50 indicate expansion.
Stocks on Wall Street fell 1.5 percent and gold prices rose
about 1.5 percent as the ISM reading rattled investors, even as
data showed European manufacturers had a solid start to the
Slower growth in the Chinese goods-producing sectors,
coupled with the U.S. data, raised concern about the health of
the global economy.
"The data was very weak across the board - it's hard to
find any good news in there. It looks like a general slowdown,
though you don't know how much of this is weather-related," said
Paul Zemsky, head of asset allocation at ING Investment
Management in New York, referring to the ISM report.
"Combine that with the fact emerging market currencies
continue to sell off, and things don't look too good for the
market now," he said. "Somewhere between now and 1,700 (on the
S&P) there's a big buying opportunity, but people need to see
some stability in emerging currencies."
The Dow Jones industrial average fell 238.96 points,
or 1.52 percent, at 15,459.89. The Standard & Poor's 500 Index
was down 31.65 points, or 1.78 percent, at 1,750.94. The
Nasdaq Composite Index was down 93.04 points, or 2.27
percent, at 4,010.84.
The dollar index, a measure of the greenback versus
basket of currencies, fell 0.26 percent to 81.096 and the euro
gained 0.24 percent against the dollar to 1.317. The dollar fell
0.88 percent to 101.13 yen.
U.S. Treasuries yields fell to their lowest since early
November, with the 10-year note rising 15/32 in
price, pushing its yield down to 2.6113 percent.
Dan Morris, global Investment strategist at TIAA-CREF in New
York, where he helps oversee $564 billion in assets, said he was
telling clients to keep calm and stay invested, as the decline
in U.S. markets was not unexpected.
"I don't think anyone is too shocked this is happening, it
was more a question of when and how significant. You were going
to have a soft patch," Morris said.
U.S. stocks are likely to post high single-digit returns
this year, with forward price-to-earnings ratios of about 15,
slightly higher than the past quarter century, he said. But
China, because of its size, could be a concern, he added.
Brazil's Bovespa index fell 2.4 percent and its
currency, the real, fell. Mexico's bolsa index
fell just 0.3 percent.
Gold for April delivery rose 1.5 percent to $1,258.7
Brent crude oil dropped to a two-week low below $106 a
barrel as the weak factory data from China stoked concerns about
demand, but violence in Iraq and Syria limited the fall.
Brent slipped 33 cents to $106.07 a barrel. U.S. oil
fell 85 cents to $96.64.