World stocks head for weekly loss; oil slumps

By Wanfeng Zhou

NEW YORK (Reuters) – Major stock markets headed for their fifth weekly loss in six weeks Friday on growing worries about the global economy, while U.S. crude oil prices tumbled $3 after Saudi Arabia began offering more oil to Asian refiners.

The euro fell against the dollar and yen as worries over Greece’s debt crisis returned to center stage and investors scaled back expectations of 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.

“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.”

U.S. stocks opened sharply lower, while Treasury prices rose as investors turned to lower-risk government debt.

The Dow Jones industrial average was down 115.99 points, or 0.96 percent, at 12,008.37. The Standard & Poor’s 500 Index was down 11.71 points, or 0.91 percent, at 1,277.29. The Nasdaq Composite Index was down 20.06 points, or 0.75 percent, at 2,664.81.

World stocks as measured by the MSCI world equity index fell 1 percent, on track for a decline of 1.5 percent this week. The index has lost more than 6 percent over the past six weeks and is only up 1.2 percent so far this year.

The FTSEurofirst 300 stock index was down 1.1 percent at 1092.03 points. Earlier Japan’s Nikkei closed up half a percent.

U.S. crude oil fell $2.65 a barrel to $99.27. Brent crude was down $1.24 at $118.33 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 Friday. It was the first evidence the kingdom is taking steps to raise supplies unilaterally after OPEC earlier this week failed to agree on an increase in the cartel’s production targets.

 

GREEK DEBT

The euro fell 0.7 percent to $1.4404 and was down 0.9 percent to 115.46 yen , hurt by the lack of unity among euro zone officials on a resolution of Greece’s debt troubles.

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.

Core euro zone debt was generally a bit stronger, but there was more pressure on the periphery as the premium investors demand to hold Spanish and other lower-rated government bonds rather than benchmark German Bunds rose.

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.

Benchmark U.S. 10-year Treasury notes were trading 10/32 higher in price to yield 2.96 percent, down from 3.00 percent late Thursday. (Additional reporting by Edward Krudy and Chris Reese in New York, and Atul Prakash and Jeremy Gaunt in London; editing by Dan Grebler)