NEW YORK (Reuters) - Fear gripped world markets on Thursday, pummeling stocks and driving the dollar to a near 15-year low against the yen as the latest economic data spurred new worries of a deepening slowdown in the United States that could reverberate around the world.
Investors fled for the safety of U.S. Treasuries and gold, sending the yield on the 30-year Treasury bond to its lowest level since April 2009 and driving gold to a seven-week high in New York.
New U.S. claims for first-time jobless benefits scaled a nine-month high last week, while the Federal Reserve Bank of Philadelphia reported an unexpected contraction in manufacturing in the Mid-Atlantic region.
“The U.S. macroeconomic numbers once again increased doubts regarding the strengths of the U.S. economy in the second half and raised concerns that the economy might be weakening more than previously anticipated,” said Tammo Greetfeld, equity strategist at UniCredit in Munich.
“Investors ... will increasingly ask themselves how much scope the U.S. central bank actually does have to successfully counter an economic downturn, if needed.”
The president of the St. Louis Federal Reserve Bank, James Bullard, said the U.S. central bank may need to enlarge its bond purchases if the economic recovery slows further.
Initial U.S. unemployment claims unexpectedly rose by 12,000 to 500,000 in the week ended August 14, marking a third straight week of gains, the Labor Department reported.
And the contraction reported by the Philadelphia Fed in its business activity index confounded markets that had been expecting a rise.
“The risk of double-dip has increased,” said Jim Baird, chief investment strategist at Plante Moran Financial Advisors in Kalamazoo, Michigan. “Investors are trimming their exposure to risky assets.”
The Dow Jones industrial average .DJI was down 144.33 points, or 1.39 percent, at 10,271.21. The benchmark Standard & Poor's 500 Index .SPX was down 18.53 points, or 1.69 percent, at 1,075.63. The Nasdaq Composite Index .IXIC was down 36.75 points, or 1.66 percent, at 2,178.95.
The selloff was broad, with five stocks falling for every one rising on the New York Stock Exchange. Sectors most sensitive to growth were hit hardest. Manufacturers 3M (MMM.N), United Technologies (UTX.N), and Boeing (BA.N) were the biggest drags on the Dow.
On the other side of the Atlantic, European shares hit a one-month closing low. The FTSEurofirst 300 .FTEU3 index of top European shares fell for a second straight session and ended down 1.5 percent at 1,036.84 points, the lowest close since July 21.
Overall, the MSCI All-Country World equity index .MIWD00000PUS fell 1.1 percent after hitting its highest in more than a week earlier in the session.
Latin America stocks were pressured by concerns about slowing growth in the United States, which is Mexico’s top trading partner and a major influence on the region.
The dollar was down 0.1 percent at 85.33 yen, off a session low of 84.89 touched after the Philly Fed factory data, but still off a 15-year low of 84.72 yen hit on trading platform EBS last week.
The dollar also fell more than 1 percent versus the Swiss franc to trade as low as 1.0295, a level last seen January 19, according to Reuters data.
The euro was down 0.29 percent at $1.2818 from a previous session close of $1.2855.
The jobless claims figure “fits in with a gloomier assessment of the U.S. economy, and the yen has gained a bit on it,” said Brown Brothers Harriman’s Thin. “But people are still questioning whether to sell the dollar on weak U.S. data or buy it on a general move away from risk.”
Benefiting from the renewed flight to safety, U.S. Treasuries and gold prices rose.
“The Philly Fed report is concerning because it had been showing the economy was doing okay,” said Ira Jersey, interest-rate strategist at Credit Suisse in New York.
“But now it is showing the new orders and employment components are in negative territory. That’s bad news for the economy and good news for the Treasuries market.”
Long-dated debt led the rally, with the yield on 30-year bond hitting a 16-month low of 3.622 percent and the 10-year note yield posting a 17-month low at 2.557 percent. The two-year yield touched an all-time low of 0.475 percent.
In energy and commodities prices, U.S. light sweet crude oil fell 99 cents, or 1.31 percent, to settle at $74.43 per barrel, and spot gold prices rose $2.30, or 0.19 percent, to $1,230.80. The Reuters/Jefferies CRB Index .CRB was down 1.68 points, or 0.62 percent, at 268.22.
Copper prices dropped from a two-week high on the London Metal Exchange to trade at $7,352 a metric ton from $7,390 a metric ton at the close on Wednesday, while oil dropped below $75 per barrel.
Additional reporting by Emily Flitter and Walter Brandimarte in New York; Editing by Leslie Adler