Economic worries hit stocks, oil; euro slips

2011-06-06 17:38

New York - Major stock markets fell for a fourth session on Monday on concerns about slowing global economic growth, while the euro slipped after a German official suggested a second Greek bailout was not yet certain.

Crude oil prices were lower ahead of an Opec meeting later this week, weighed by growing signs that high prices are destroying energy demand in the West.

Friday's weak U.S. labor data pushed the benchmark S&P 500 stock index to its fifth weak of losses, but the index is still up nearly 3.0% for the year.

The Dow Jones industrial average was down 40.15 points, or 0.33%, at 12 111.11. The Standard & Poor's 500 Index was down 7.67 points, or 0.59%, at 1 292.49. The Nasdaq Composite Index was down 10.82 points, or 0.40%, at 2 721.96.

"This seems like a continuation of sentiment from last week, where investors are coming to the realization that the economy is not growing as strongly as once anticipated," said Wasif Latif, vice president of equity investments at USAA Investment Management in San Antonio, Texas.

"The weak economic data throughout last week corroborated those suspicions and because of that you are seeing the continuation (of the equities slide)."

The FTSEurofirst 300 traded down 0.5% at 1 105.40 points.

World stocks, as measured by the MSCI world equity index, fell 0.2%. The Thomson Reuters global stock index dropped 0.4%. Emerging market stocks shed 0.2%.

"All in all, the big picture isn't rosy. There is no durable economic growth in developed countries, there's a risk of overheating in China and there's also the inflation issue. Sentiment is not really positive on the market at the moment," said Arnaud Poutier, co-head of IG Markets France.

Brent crude oil was last down $1.34 at $114.50, while US crude fell $1.25 to $98.94 a barrel.

At an OPEC meeting this week, the cartel could lift its oil production targets, although leading member Saudi Arabia is likely to face tough opposition in its push to raise supply from hawks Venezuela and Iran.

Greek bailout not certain

The euro last traded 0.2% lower at $1.4606, after dipping below $1.46 after a spokesman for the German finance ministry said a second aid program for Greece was not yet certain.

Policymakers have inched toward a new bailout package that German media said could exceed €100bn, and that helped the euro hit a one-month high of $1.4658.

Traders said the market assumes a deal will be reached to allow Greece more time to repay its debt and that markets also were already bracing for European Central Bank President Jean-Claude Trichet on Thursday to signal plans to raise euro zone interest rates in July.

"The focus will turn toward interest rate differentials, and with the Federal Reserve unlikely to do anything this year, an ECB rate hike will pull money toward the euro and other currencies," said Boris Schlossberg, head of research at GFT in New York.

Greece's cabinet will debate the austerity plans on Monday as popular protests swell and Prime Minister George Papandreou seeks to avoid the fate of his socialist peers in bailed-out peripheral peer Portugal, which voted in a new center-right government on Sunday.

Concerns about the economy fueled fresh gains for gold, with spot gold at around 1 546 an ounce and targeting technical resistance at around $1 550 an ouncewhile benchmark 10-year Treasury notes were 8/32 lower, yielding 3.02%, from 2.99%.

Greek two-year yields were 34 basis points lower on the day at 23.26%. But with bid/ask spreads steady at more than 300 bps, investors were not rushing to buy. Five-year credit default swaps were up 15 bps at 1 385 bps, according to Markit.