Stocks at 1-month low as euro dips on growth fears

By Walter Brandimarte

NEW YORK (BestGrowthStock) – Lingering fears about economic growth drove world stocks to a one-month low on Friday, while boosting the safe-haven appeal of U.S. government bonds and the U.S. dollar.

The euro currency hit a more than five-week low near $1.2660 after European Central Bank Governing Council member Axel Weber said the ECB should extend its loose monetary stance, raising fears of more economic weakness ahead in the euro zone.

Oil prices also fell more than 1 percent as investors continued to worry about the poor U.S. jobs and manufacturing numbers from Thursday.

U.S. jobless claims hit a nine-month high and a U.S regional manufacturing index showed the first contraction in a year, reviving fears of a double-dip recession in the world’s largest economy.

“Basically growth is just not there,” said Dave Rovelli, a trader at Canaccord Adams in New York. “Until this administration figures out how to get people hired, we are going to be seeing a lot of these big up days, big down days, and the market’s going to be all over the place.”

In the U.S. Treasury bond market, yields on benchmark 10-year and 30-year Treasuries initially fell to their lowest in nearly a year and a half. However, they rose later in the session as investors braced for $109 billion supply of coupon-bearing debt coming next week when the Treasury holds its debt auctions.

Also contributing to the pullback in the Treasuries market was a late rebound in some U.S. tech shares, which helped key U.S. stock indexes trim early losses.

The Dow Jones industrial average (.DJI: ) closed down 57.59 points, or 0.56 percent, at 10,213.62, while the Standard & Poor’s 500 Index (.SPX: ) lost 3.94 points, or 0.37 percent, to 1,071.69. But the Nasdaq Composite Index (.IXIC: ) ended up 0.81 points, or 0.04 percent, at 2,179.76.

“No one’s making a big bet either way, it’s just short-term moves and the net is, nothing is getting done.” said Ryan Detrick, senior technical strategist at Schaeffer’s Investment Research in Cincinnati, Ohio.

Exxon Mobil Corp (XOM.N: ), the largest stock in the S&P 500, slid 0.67 percent as oil prices fell on concerns that a global economic slowdown would reduce demand for the commodity.

U.S. crude oil ended down 97 cents, or 1.3 percent, at $73.46 a barrel, the lowest since front-month prices ended at $71.98 on July 6.

The MSCI All-Country World equity index (.MIWD00000PUS: ) slid 0.99 percent while the FTSEurofirst 300 index (.FTEU3: ) closed 0.67 percent lower in its third straight session of losses. Both indicators were at their lowest in one month.

European construction stocks continued their slide from Thursday’s session when Holcim (HOLN.VX: ), the world’s second-biggest cement maker, posted disappointing first-half earnings. Holcim, Saint-Gobain (SGOB.PA: ) and HeidelbergCement (HEIG.DE: ) slipped 2.1 to 2.6 percent.

DOLLAR GAINS

The dollar saw a renewed safe-haven bid, reaching a one-month high against a basket of major currencies measured by the U.S. Dollar Index (.DXY: ), which gained 0.68 percent.

The greenback also gained 0.32 percent against the Japanese yen to 85.61.

The euro was further pressured by comments from Bundesbank chief Axel Weber, who said it would be “wise” to extend unlimited liquidity to banks past the end of 2010 and resume discussions to exit loose monetary conditions next year.

The European single currency was 0.85 percent lower on the day at $1.2711, after hitting its lowest point since mid-July, according to Reuters data.

Weber’s “comments simply confirm what many already expect from the ECB, that the aggregate economy (despite recent solid performance from Germany) is not yet prepared to be taken off of monetary policy life support,” said Sacha Tihanyi, a currency strategist at Scotia Capital in Toronto.

As U.S. Treasuries prices fell late in the session, 2-year notes were down 1/32 in price, with the yield at 0.4952 percent. The 30-year bonds fell 4/32 in price, with the yield at 3.6593 percent.

Earlier, two-year yields had fallen to a record low of 0.47 percent while those on 30-year bonds reached a 16-month low of 3.61 percent.

(Additional reporting by Leah Schnurr, Richard Leong, and Wanfeng Zhou, Editing by Chizu Nomiyama)

Stocks at 1-month low as euro dips on growth fears