*Author: E.L. & C. Baillieu Stockbroking - by Andrew Thain*
*HEADLINES*
- The Dow Jones Industrial Average sank into the red for the year after a dismal U.S. jobs report sent investors fleeing stocks and into the safety of bonds.
- European stock markets tumbled, knocked down by a combination of downbeat euro-zone manufacturing surveys and U.S. payrolls data.
- Crude-oil futures tumbled on increasing signs of a global economic slowdown.
- Gold prices roared to a three-week high on speculation of fresh monetary stimulus triggered by a disappointing U.S. monthly employment reading.
*US MARKETS
*
The Dow Jones Industrial Average sank into the red for the year after a dismal U.S. jobs report sent investors fleeing stocks and into the safety of bonds.
The Dow had its worst day this year on Friday, slumping 274.88 points, or 2.2%, to 12118.57. Investors also fled other assets that are reliant on a strong economy such as oil and copper. The beneficiaries were Treasurys. Prices soared and the yield on the benchmark 10-year note tumbled to a record low of 1.467%. Gold soared 3.7%.
With Friday's drop, two indexes fell into what many investors consider a correction, dropping 10% off their recent peaks. The Russell 2000 index of small-capitalization stocks lost 3.2% on Friday, bringing its slide to 13% from its peak in March, while the Nasdaq Composite dropped 2.8%.
It is now 12% off its high in March. The two major large-cap indexes, the Dow and the Standard & Poor's 500-stock index, are both on the cusp of a correction, with the S&P 500 just one point away.
The stock decline has been sharp and swift, following a strong start to the year. The Dow staged its best first quarter since 1998, driven by strong company earnings and relatively few negative headlines about Europe.
Even the U.S. economy showed signs of gaining steam. Meanwhile, many investors and analysts were warning that the good times couldn't last.
*EUROPEAN MARKETS*
European stock markets tumbled, knocked down by a combination of downbeat euro-zone manufacturing surveys and U.S. payrolls data. The Stoxx Europe 600 index dropped 1.9%, to 235.09, its lowest close since December. For the week, the index dropped 3.1%.
In London, GlaxoSmithKline dropped 1.6%, weighing on the U.K. FTSE 100 index, which dropped 0.9%, at 5260.19. The index fell 1.7% on the week.
In Germany, the DAX index lost 3.4%, to 6050.29, its lowest close since January. On the week, the index lost 4.6%.
*ASIAN MARKETS*
The economies of Asia, both the emerging markets and the more developed countries, are being hit by a double whammy of slowing domestic growth and the impact of the European debt crisis on Asian exports and finance.
In Japan, the Nikkei fell 1% in early Friday trading. It was down 10.3% for May, its worst month in two years. For Asia's most-developed economy, the Europe-sparked fear takes a different form from that affecting its developing neighbors, centering not on capital drying up, but on a surge of money flowing into the country, seen as a haven.
Investors pouring cash into Japanese government debt pushed the yield of the 10-year bond at one point Thursday to 0.810%, the lowest since July 2003.
*AUSTRALIAN MARKETS*
The Australian dollar sank to its lowest mark against the greenback in almost eight months overnight and local shares are poised to resume their slide after weak US jobs figures added to concerns about the strength of the global economy.
Local shares are set to sink when they open on Monday, with SPI200 futures down 58 points, or 1.4 per cent, to 4012. A loss of that amount would drag the ASX200 index near the key 4000-point mark, a level it's not breached since November 28 last year.
Australian resource producers may have a rough start to next week, particular those in the energy sector, after oil prices sank 3.8 per cent in New York to the lowest level in eight months.
*OIL*
Crude-oil futures tumbled on increasing signs of a global economic slowdown. U.S. futures fell to their lowest point in eight months, while the European benchmark, Brent futures, plunged below the $100 level and closed at its lowest point in 17 months.
Light, sweet crude futures for July delivery settled at $83.23 a barrel, down $3.30, or 3.8%, on the New York Mercantile Exchange. That's the lowest settlement since last Oct. 7.
*METALS*
Gold prices roared to a three-week high on speculation of fresh monetary stimulus triggered by a disappointing U.S. monthly employment reading.
Gold for June delivery, the front month contract, settled $57.90, or 3.7%, higher at $1,620.50 a troy ounce on the Comex division of the New York Mercantile Exchange. The most actively traded contract, for August delivery, rose $57.90, or 3.7%, to settle at $1,622.10 a troy ounce.
Andrew Thain of Baillieu
Baillieu HOME PAGE
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