June 21, 2012 / 6:40 PM / 7 years ago

GLOBAL MARKETS-Stocks, oil, gold drop on growth worries

* Global stocks drop over 1.0 pct on China, Europe, US data
    * Brent at lowest since Dec 2010; US crude below $80/bbl
    * Spain's bond yields fall

    By Caroline Valetkevitch
    NEW YORK, June 21 (Reuters) - Global stocks fell more than 1
percent and Brent crude hit its lowest since December 2010 on
Thursday, following data showing Chinese, European and U.S.
manufacturing activity had slowed further, just a day after the
Federal Reserve extended its monetary stimulus program.
    U.S. stocks added to losses after Goldman Sachs recommended
shorting the benchmark S&P 500 index, with a target level of
1,285. It was the worst day for all three major
U.S. indexes since June 1.
    Gold fell and was on track for its biggest decline in more
than three months on global economic worries, while the U.S.
dollar rose against the euro and yen as the Fed's move
disappointed investors who had hoped for a more aggressive
    Business activity across the euro zone shrank for a fifth
straight month in June, and Chinese manufacturing contracted,
while weaker overseas demand slowed U.S. factory growth, surveys
showed on Thursday. 
    The data clouded the outlook for the world economy and
compounded fears that Europe's debt crisis, and slower growth in
the United States and Asia, would hurt economies worldwide.
    "The genesis is Europe and it's starting to flow through
everything now. Business has slowed down," said Stephen
Massocca, managing director at Wedbush Morgan in San Francisco. 
    The Dow Jones industrial average was down 185.16
points, or 1.44 percent, at 12,639.23. The Standard & Poor's 500
Index was down 22.60 points, or 1.67 percent, at
1,333.09. The Nasdaq Composite Index was down 54.48
points, or 1.86 percent, at 2,875.97.  
    MSCI's global equity index declined 1.6
percent, and European shares ended down 0.5 percent.
    On Wednesday, the Fed chose to extend its bond-buying
program, dubbed "Operation Twist," rather than implement more
quantitative easing as some had hoped.
    The U.S. central bank made its decision after lowering
forecasts for growth and employment in the world's largest
economy in 2012 and 2013. It said it would consider more
stimulus measures if the situation worsened. 
    In Europe, preliminary manufacturing and service sector data
across the 17-nation euro area showed the downturn in the region
was becoming entrenched as falling new orders and rising
unemployment hit business confidence. 
    The survey data showed that Germany's private sector shrank
in June for the second month running, with manufacturing
activity hitting a three-year low.
    A similar survey of private sector activity in China,
compiled by HSBC, found its factory sector had shrunk for an
eighth straight month in June, on weaker demand for exports.
    Economic growth in the world's most populous nation is
widely expected to have slowed for a sixth straight quarter in
April through June as the country feels the impact of the euro
area debt crisis and property controls weigh on domestic demand.
    In U.S. stocks, energy and materials shares led declines,
with the S&P energy sector index down 3.2 percent and
the materials index down 2.7 percent. 
    In the oil market, Brent crude fell $2.85 from
Wednesday's settlement to $89.84 a barrel, and hit its lowest
level since December 2010. U.S. crude traded down $2.95 to
    The dollar index, a measure of the greenback's
performance against a basket of currencies, rose 0.7 percent to
    Spot gold was down 2 percent at $1,574.40 an ounce.
    "The manufacturing data was deflationary. Gold selling
accelerated following yesterday's Fed announcement, which was
modestly disappointing for those traders who had bought gold in
anticipation of more help from the Fed," said Mark Luschini,
chief investment strategist of Janney Montgomery Scott, a
broker-dealer with $54 billion in assets.   
    Spanish government bond yields fell sharply as Madrid tapped
the markets with a sale of medium-term debt, although at an
increased cost. 
    Spain sold 2.2 billion euros of two-, three- and five-year
bonds, slightly more than the relatively small stated target
amount, but it relied on its domestic banks to absorb the
     Ten-year Spanish government bond yields fell
15 basis points on Thursday to 6.62 percent, having risen to
almost 7.30 percent last week. 
    In the U.S., bond yields were down as well. Benchmark
10-year Treasuries were last up 13/32 in price to
yield 1.61 percent, down from 1.65 percent late on Wednesday.
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