Reuters: US Dollar Report: GLOBAL MARKETS-Growth worries weigh on oil, stocks; dollar up

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GLOBAL MARKETS-Growth worries weigh on oil, stocks; dollar up Mar 22nd 2012, 19:11 Thu Mar 22, 2012 3:11pm EDT * Manufacturing sectors contract in China, Germany, France * Uncertainties over China could fuel market turbulence * Data suggest recession in euro zone is unavoidable * Wall St drops around 0.5 pct, U.S. Treasuries prices rise By Walter Brandimarte NEW YORK, March 22 (Reuters) - Oil prices plunged nearly $2 per barrel and global stocks retreated from recent highs on Thursday as a manufacturing contraction in China and in the two largest economies of the euro zone fueled worries about global growth. U.S. Treasuries prices and the dollar rose as risk aversion increased, although fresh evidence that the U.S. labor market continues to strengthen tempered investors' bid for safety. China, the world's second-biggest economy and a key driver of growth, said its manufacturing sector shrank for a fifth straight month in March. A senior government economist said the economy is facing more downward pressure than had been expected. In the euro zone, a recession seemed unavoidable after Germany and France reported unexpectedly sharp declines in manufacturing activity. Britain added to the gloom with a steeper-than-forecast fall in retail sales. "The thought that the global economy might be entering a recession is what's causing investors to take a pause from the rally," said Jack DeGan, chief investment officer at Harbor Advisory Corp in Portsmouth, New Hampshire, referring to the sell-off in stocks. Fears that an economic slowdown could dent demand for energy drove U.S. crude oil prices down to a two-month low of $104.93 a barrel, a fall of $1.92, or 1.79 percent. Wall Street indexes fell more than half a percentage point. The Dow Jones industrial average was down 87.03 points, or 0.66 percent, at 13,037.59. The Standard & Poor's 500 Index was down 11.86 points, or 0.85 percent, at 1,391.03. The Nasdaq Composite Index was down 15.23 points, or 0.50 percent, at 3,060.09. World stocks measured by the MSCI All-Country World Index dropped 0.7 percent. Earlier in the week, the index had closed near the highest levels since July. In Europe, the FTSEurofirst 300 index closed 1.12 percent lower, breaking a key support level at 1,091, which represents its February high. Miners were among the biggest decliners on concerns about falling Chinese demand for metals. "For mining shares it has big implications; the Chinese data means there will be a reduction in resource demand if construction slows in the country," said Darren Sinden, senior sales trader at Silverwind Securities. "The Chinese PMIs are lending weight to a case of a hard landing, and if Germany is the better part of Europe and it cannot grow, the situation for the markets will be difficult." U.S. Treasury bond prices rose as investors sought safety, although they trimmed part of the gains after data showed U.S. claims for unemployment benefits fell to a four-year low last week. Benchmark 10-year Treasury notes were trading 6/32 higher in price to yield 2.27 percent, down from 2.3 percent late Wednesday. Encouraging jobs data also boosted the dollar against major trading-partner currencies, many of which are direct beneficiaries of the Chinese economic boom. The greenback was 0.1 percent higher, as measured by the U.S. Dollar Index. The euro weakened 0.2 percent against the dollar, to $1.3182 . "When you get numbers like these out of the euro zone it definitely puts the growth outlook into question and points to a mild recession," said Niels Christensen, currency strategist at Nordea in Copenhagen. Gold prices slid to their lowest since mid-January, pressured by the stronger dollar and declining expectations for further U.S. liquidity injections, which usually find their way into the gold market. Spot gold was down 0.48 percent to $1,642.00 an ounce. The metal earlier hit a low of $1,627.68 - its weakest since Jan. 13. Link this Share this Digg this Email Reprints

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