Stocks tumble on growth fear; oil down $3

By Wanfeng Zhou

NEW YORK (Reuters) – Major stock indexes headed for their fifth weekly loss in six weeks Friday on growing global economy worries, while U.S. crude prices sank $3 on Saudi Arabia’s offer of more oil to Asian refiners.

The euro fell the most against the dollar in a month as worries over Greece’s debt crisis returned to center stage and investors scaled back expectations on the pace of future interest-rate hikes in the euro zone.

Fears the global economic recovery is stumbling grew after data showed China’s export growth slowed in May. That followed a barrage of reports in recent weeks showing the U.S. economy has hit a soft patch, which has rattled investors.

Wall Street fell sharply, with the Dow industrials and the S&P 500 on track for a sixth straight week of losses. The Nasdaq turned negative for the year for part of the session before rebounding slightly in mid-afternoon trading.

The losses in global equities drove Treasury prices up as investors flocked to lower-risk government debt.

“We have had a slow erosion of economic numbers in the past quarter,” said Brian Battle, vice president of trading at Performance Trust Capital Partners in Chicago. “The economic numbers aren’t supporting this level of valuation.”

The Dow Jones industrial average was down 140.47 points, or 1.18 percent, at 11,983.89. The Standard & Poor’s 500 Index was down 12.80 points, or 1 percent, at 1,276.20. The Nasdaq Composite Index was down 27.34 points, or 1.02 percent, at 2,657.53.

World stocks as measured by the MSCI world equity index fell 1.3 percent. The index has lost 7 percent over the past six weeks, erasing almost all of its gains so far this year.

European shares fell to a three-month closing low and posted their sixth week of losses. The FTSEurofirst 300 stock index ended 1.4 percent lower at 1,089.55 points.

Earlier, Japan’s Nikkei closed up 0.5 percent.

U.S. crude oil fell more than $3 to a session low at $98.60 a barrel, before recouping some of that loss to trade at $99.19. Brent crude was down $1.30 at $118.27 a barrel, having risen to $120.07 earlier, the highest since May 5.

Top oil exporter Saudi Arabia is offering more crude to Asian refiners in July, industry sources with direct knowledge of negotiations said. It was the first evidence the kingdom is taking steps to raise supplies unilaterally after OPEC failed earlier this week to agree on an increase in the cartel’s production targets.

GREEK DEBT

The euro fell 1.2 percent to $1.4332, on track for its biggest daily drop since May 11. It was down 1.3 percent at 115.01 yen , hurt by the lack of unity among euro-zone officials on a resolution of Greece’s debt troubles.

Adding to bearish sentiment, the European Central Bank kept its 2012 inflation forecast unchanged Thursday after leaving rates at 1.25 percent, suggesting the pace of euro-zone interest-rate hikes may be slower than previously thought.

Investors received mixed messages about the progress of debt assistance to Greece. Germany stuck to its demand that private investors contribute to a second bailout even after renewed ECB opposition to any investor participation that might be deemed involuntary.

“The image of European policymakers and the ECB standing toe to toe on this particular issue is something investors find deeply unsettling,” said Michael Derks, chief strategist at FXPro.

Five-year credit default swaps on Greek government debt rose 25 basis points to 1,545 basis points, according to data monitor Markit. That means it costs 1.545 million euros to protect 10 million euros of exposure to Greek bonds.

Spanish, Portuguese and Ireland CDS all traded higher, while bonds issued by the euro zone’s most debt-laden economies came under pressure.

The benchmark U.S. 10-year Treasury note rose 8/32 in price to yield 2.97 percent, down from 3.00 percent late Thursday.

Spot gold fell to a one-week low at $1,525.74 an ounce, before bouncing back to $1,528.50, hampered by the dollar’s strength and sharp losses in oil prices. (Additional reporting by Edward Krudy, Rodrigo Campos, Chris Reese, Robert Gibbons, Frank Tang; Editing by Jan Paschal)