Friday 21.30 BST. Global stocks started the month on a weak note, led by declines on Wall Street, as signs the world’s largest economy is stalling added to worries over the outlook for the eurozone.
Investors sold most “growth-related” assets and favoured US government bonds after news of a surprisingly soft US non-farm payrolls report.
“The weakness in the US data is overlapping with an intensifying crisis in Europe, which means the risk-off trade continues,” said Michelle Meyer, senior economist at Bank of America Merrill Lynch.
The broad S&P 500 suffered a loss of 2.5 per cent, retrenching below the 1300 points mark. The blue-chip Dow Jones Industrial Average also fell more than 2 per cent and erased this year’s gains.
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Such was the disappointment at the job numbers that the dollar index, which usually sports an inverse correlation to investor risk appetite, also lost all its early advance and fell 0.2 per cent.
This retreat for the buck reflected an increasing belief among some traders that further monetary easing by the Federal Reserve is now more likely – a view that is being expressed in gold, which rose 4 per cent to $1,623 an ounce.
The prospect of more QE has helped some “risk” assets come off their session extremes, but still many traders are scrambling for “safety”, pushing US 10-year benchmark yields down 10 basis points to 1.45 per cent, a record low.
The extent of investor caution could be seen in the German debt market, where yields on two-year Schatz briefly turned negative by two-tenths of a basis point, meaning fund managers are so desperate for a “safe” place to park their money that they would pay Berlin for the privilege. Ten-year Bunds have touched a record low of 1.13 per cent, but are now down 4bp to 1.18 per cent.
The FTSE All-World equity index shed 1.9 per cent after the Asia-Pacific region fell 1.1 per cent and as the FTSE Eurofirst 300 relinquished early gains to drop 2.1 per cent.
The pullback in the dollar helped the euro rise 0.4 per cent to $1.2415, having earlier touched a two-year low of $1.2290. Stresses remain in the eurozone, however, where Italian and Spanish yields fell several basis points a piece but remain elevated when compared with Bunds.(more of the article)