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CORRECTED-GLOBAL MARKETS-Stocks, euro slip as US jobs report awaited

by on July 5, 2012 10:01 pm GMT
 

Thu Jul 5, 2012 6:01pm EDT

(Removes sentence after paragraph 20 that erroneously indicated
a retreat in some agricultural prices.)

* Investors await Friday’s U.S. jobs report

* US stocks end down; commodities mixed, euro slides

* China’s springs rate-cut surprise, ECB cuts as expected

* Spain gets no joy from EU summit deal at bond sale

By Barani Krishnan

NEW YORK, July 5 (Reuters) – U.S. stocks and the euro slid
on Thursday as new stimulus measures by major central banks
failed to spur confidence, with investors keenly awaiting the
monthly U.S. jobs report for signs of whether the European debt
crisis is weighing on the U.S. recovery.

In expected moves, the European Central Bank cut its main
interest rate to a record low and the Bank of England announced
it would buy 50 billion pounds of assets with newly created
money, while China surprised investors with a cut in its lending
rate for the second time in two months.

But euphoria over those measures, which initially drove
European equities to a two-month high, had faded by the time
Wall Street opened. U.S. stocks on Tuesday had marked their
biggest three-day rally of the year; U.S. markets were closed on
Wednesday for the Independence Day holiday.

Tom Alexander, head of Alexander Trading in Savannah,
Georgia, called the stimulus actions “desperate.”

The central banks “are trying to put a finger in this giant
dike of debt and they really don’t know what to do or how to do
it,” he said.

As the day progressed, investors were asking if the U.S.
Federal Reserve would launch new stimulus measures that might –
for a change – get Wall Street up and running again?

“If we get a couple of more bad jobs reports, it will come
in with more stimulus,” said John Canally, investment strategist
at LPL Financial in Boston.

“Today’s reports suggest they might hold off,” he said.

U.S. private employers added 176,000 new workers to their
payrolls last month, the ADP National Employment Report showed
on Thursday , after increasing 136,000 in May.

Initial claims for state unemployment benefits dropped
14,000 to a seasonally adjusted 374,000 last week, the Labor
Department said in a separate report. The four-week average for
new claims, a better measure of labor market trends, fell 1,500
to 385,750.

The U.S. Labor Department’s closely watched monthly jobs
report to be released on Friday is expected to show a slight
increase in hiring at best.

News that the pace of growth in U.S. services sector slowed
to a 2-1/2-year low in June had more impact on investors already
fearing the euro zone debt crisis was sapping growth –
encouraging them to take profit on a rally that ran from Friday
through Tuesday.

“The genesis of the economic decline we’re seeing is Europe.
It is spilling everywhere,” said Stephen Massocca, managing
director at Wedbush Morgan in San Francisco.

The Dow Jones industrial average closed down 47.15
points, or 0.36 percent, at 12,896.67. The Standard & Poor’s 500
Index fell 6.44 points, or 0.47 percent, at 1,367.58. The
Nasdaq Composite Index ended off 0.04 points, or 0.00
percent, at 2,976.12.

Financial stocks weighed on Wall Street, with Dow component
JPMorgan Chase falling 4.2 percent to $34.38 and Bank of
America Corp off 3 percent at $7.82.

The S&P Financial index and the KBW Banks index
fell about 1.5 percent. Financial shares have often taken
the brunt of selling during the European crisis, though they
experienced a good run during the recent rally.

The FTSEurofirst 300 index of leading European
shares settled down 0.1 percent at 1,044.47, For the week,
though, it still showed a gain of about 1.8 percent.

The MSCI world equity index, which gained
briefly on the Chinese rate cut, ended down 0.6 percent at
314.33.

The euro slumped against a range of currencies, hitting a
one-month low against the dollar. It was last down 1.09 percent
against the dollar at $1.2390, after falling as low as $1.2362.

In commodities, metals markets, including gold,
tracked the weak sentiment on Wall Street, while oil
was helped only partially by Norway’s prolonged
oil workers’ strike.

Agricultural markets gave investors a rare reprieve from the
gloom and doom. Corn prices surged to a 2012 high, and
soybeans neared their 2008 record peaks on fears of crop
damage from drought.

Concerns over Europe returned to the fore as Spain found it
had gained little benefit from last week’s EU deal to help lower
its borrowing costs.

Madrid was forced to pay the highest rates in over seven
months to borrow 10-year funds. Demand was solid at the auction
of 3 billion euros ($3.75 billion) of new debt but yields on the
longer-dated bonds rose to 6.43 percent.

The Spanish auction was the first real test of sentiment
toward the recession-hit country since European leaders agreed
last week to allow the bloc’s bailout funds to buy bonds in the
secondary markets and directly recapitalize ailing banks.

French borrowing costs held close to historic lows at an
auction of 7.8 billion euros of bonds, a day after Paris
announced hefty tax rises on the wealthy to plug a revenue
shortfall caused by flagging economic growth.

“The market continues to function, but on this evidence
there is still no significant change in sentiment or investor
demand towards Spanish debt,” said Peter Chatwell, a rate
strategist at Credit Agricole.

(Editing by Leslie Adler)