February 28, 2008 / 12:47 PM / 10 years ago

GLOBAL MARKETS-Dollar plumbs fresh low, stocks slide

(Updates prices, adds U.S. data, comments)

By Ian Chua

LONDON, Feb 28 (Reuters) - Further signs of weakness in the U.S. economy sent the dollar to a fresh low versus a basket of currencies on Thursday and kept European and U.S. stocks under pressure.

Following a recent string of negative U.S. economic data, figures on Thursday showed a sharp jump in weekly jobless claims and a weaker-than-expected reading of fourth quarter economic growth.

“Well just when you think it can’t get any worse, it does,” said Shaun Osborne, senior currency strategist, at TD Securities.

“We expected an upward revision on GDP and didn’t get it, but the concerns about the jobless claims are even bigger because it looks like the labor market is showing some pretty evident softening.”

Fretting about the health of the U.S. economy, European stock markets extended losses with the FTSEurofirst 300 .FTEU3 index of top European shares falling 1.4 percent.

Germany's DAX .GDAXI and London's FTSE .FTSE both also shed more than 1 percent.

“European equities are vulnerable to a slowdown in the (United) States spreading to Europe, exacerbated by the euro’s strength and on a currency-adjusted basis, they don’t look massively attractive,” said Andrew Bell, strategist at Rensburg Sheppards Investment Management.

Earlier, Japan's Nikkei .N225 lost 0.8 percent, while MSCI's measure of other Asian stock markets .MIAPJ0000PUS edged 0.2 percent lower.

MSCI’s main world equity index .MIWD00000PUS slipped 0.4 percent.

Major U.S. stock indexes .SPX.DJI.IXIC were down between 0.5 percent and 0.7 percent in early trade.

Weakness in stocks gave government bonds a bid tone as investors sought the relatively safety of sovereign debt.

The March bund future FGBLc1 climbed 54 ticks, while the benchmark 10-year yield EU10YT=RR slipped to 4.03 percent. U.S. 10-year yield US10YT=RR fell to near one-week lows of 3.73 percent.


The dollar index .DXY, which tracks the greenback’s performance against six major currencies, fell to a fresh record low of 74.033 in the wake of the latest U.S. data.

The euro hit a new all-time high of $1.5152, while the dollar slid below 106 yen JPY= to one-month lows.

On Wednesday, Bernanke said it was “important to recognise that downside risks to growth remains”, signalling a readiness by the central bank to lower rates to prevent further damage to the economy. [ID:nN27381101]

Bernanke will continue his testimony later on Thursday, this time to the Senate Banking Committee.

Markets are giving a strong chance of a 50 basis point cut to the 3.0 percent fed funds rate at the March policy meeting and have started to discount the risk of a bigger 75 point cut. FEDWATCH

U.S. crude oil CLc1 rose back above $100 a barrel after traders said supply was cut in Nigeria, while gold XAU= edged back to $960.00, within easy reach of the record high of $964.70 set in the previous session.

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