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GLOBAL MARKETS-Stocks, oil slump; euro weakens on Greece

Published 06/10/2011, 12:02 PM
Updated 06/10/2011, 12:04 PM

* Slowing Chinese exports add to global economic worries

* Oil prices slump; world stocks head for weekly loss

* Lack of unity over Greece aid pressures euro (Updates prices, adds details)

By Wanfeng Zhou

NEW YORK, June 10 (Reuters) - Major stock markets headed for their fifth weekly loss in six weeks on Friday on growing worries about the global economy, while U.S. crude oil prices tumbled more than $2 after Saudi Arabia began offering more oil to Asian refiners.

The euro fell the most against the dollar in three weeks 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. For more, see [ID:nL3E7HA0B2]

Bank stocks led Wall Street sharply lower, with the Nasdaq turning negative for the year and the S&P 500 and Dow industrials on track for a sixth-straight week of losses. The losses in global equities drove Treasury prices up as investors turned 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."

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At noon EDT (1600 GMT), the Dow Jones industrial average <.DJI> was down 138.92 points, or 1.15 percent, at 11,985.44. The Standard & Poor's 500 Index <.SPX> was down 15.19 points, or 1.18 percent, at 1,273.81. The Nasdaq Composite Index <.IXIC> was down 31.49 points, or 1.17 percent, at 2,653.38.

World stocks as measured by the MSCI world equity index <.MIWD00000PUS> fell 1.3 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 0.4 percent higher so far this year.

The FTSEurofirst 300 <.FTEU3> stock index was down 1.3 percent at 1090.44 points. Earlier, Japan's Nikkei <.N225> closed up half a percent.

U.S. crude oil was down $2.67 a barrel at $99.28 after earlier dropping as low as $98.79. Brent crude was down $1.39 at $118.16 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 earlier this week failed to agree on an increase in the cartel's production targets.

GREEK DEBT

The euro fell 1 percent to $1.4367

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The European Central Bank kept its 2012 inflation forecast unchanged on 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. [ID:nLDE7590LU] [ID:nLDE7581Z8]

"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 euro zone's most debt-laden economies came under pressure.

Benchmark U.S. 10-year Treasury notes

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