Reuters: US Dollar Report: GLOBAL MARKETS-Global growth worries dent oil, stocks; dollar up

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GLOBAL MARKETS-Global growth worries dent oil, stocks; dollar up Mar 22nd 2012, 17:09 Thu Mar 22, 2012 1:09pm EDT * Manufacturing sector contracts 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 more than 2 percent and global stocks retreated from recent highs on Thursday as a contraction in manufacturing in both China and in the euro zone's two biggest economies fueled worries about global growth. U.S. Treasuries prices and the dollar rose as risk aversion increased, although fresh evidence 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, saw its manufacturing sector shrink 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. "There's a bit of a China backlash at the moment, and we should expect more turbulence as people assess whether China is heading for a hard or a soft landing," said Filip Petersson, commodity strategist at SEB in Stockholm. Fears that an economic slowdown could dent demand for energy drove U.S. crude oil prices 2.2 percent lower to $104.93 a barrel. The contract was headed to close at its lowest level since Feb. 17. Key Wall Street indexes fell about half a percentage point. The Dow Jones industrial average was down 68.56 points, or 0.52 percent, at 13,056.06, while the Standard & Poor's 500 Index declined 9.49 points, or 0.68 percent, to 1,393.40. The Nasdaq Composite Index was down 11.06 points, or 0.36 percent, to 3,064.26. World stocks measured by the MSCI All-Country World Index dropped 0.6 percent. Earlier in the week, the index had closed near the highest levels since July. In Europe, the FTSEurofirst 300 index closed 1.14 percent lower, breaking a key support level at 1,091, which represents its February highs. Miners were among the biggest decliners on concerns about falling Chinese demand for metals. "For mining shares it has big implications; the China data means there will a reduction in resource demand if construction slows in the country," said Darren Sinden, senior sales trader at Silverwind Securities. "The China PMI's 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 7/32 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 against that basket of currencies, as measured by the U.S. Dollar Index. The euro weakened 0.18 percent against the dollar, to $1.3187. "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 0.73 percent to $1,637.80 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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