Thursday July 2, 02:11 PM
GLOBAL MARKETS-U.S. jobs data hits stocks, boosts dollar
By Jeremy Gaunt, European Investment Correspondent
LONDON, July 2 (Reuters) - World stocks extended losses and Wall Street looked set to follow suit on Thursday after the U.S. government reported more job losses than expected in June.
Demand for Treasuries grew and the dollar gained against the euro.
The Labor Department said U.S. employers cut 467,000 jobs in June, while the unemployment rate rose to 9.5 percent from 9.4.
The world's biggest economy was expected to have lost 363,000 non-farm jobs, while the unemployment rate was seen ticking up to 9.6 percent.
'It looks like the economy was still losing substantial momentum as the second quarter came to a close. This report is weak across the board,' said William Sullivan, chief economist at JVB Financial Group.
'The only saving grace is that the decline in payrolls may not be as large as we saw at the start of the year.'
After pushing stocks up by more than 21 percent in the second quarter, investors have been looking for evidence of a sustainable economic recovery before buying stocks further.
MSCI world equity index was down 0.8 percent, having posted the biggest gains in its 21-year history in the three months to end-June.
The FTSEurofirst 300 index fell 1.8 percent while emerging stocks lost 0.5 percent.
The dollar gained around three-quarters of a percent against a basket of major currencies. The euro was down around 1 percent at $1.4022.
The European Central Bank, as expected, kept interest rates unchanged at 1 percent. It was weakened further on the day after ECB President Jean-Claude Trichet said euro zone activity was likely to remain weak for the rest of the year.
Moody's also downgraded euro zone member Ireland's ratings to Aa1 from Aaa (Xetra: 722800 - news) over concern about its debt.
G8 AHEAD
The focus now will turn to next week's Group of Eight summit in Italy after G8 sources told Reuters that Beijing has asked for a debate on proposals for a new global reserve currency and the issue could be referred to briefly in the summit statement.
China's Vice Foreign Minister He Yafei said he had not heard of such a request but he said China hoped for diversification of the international currency system in the future and it would be normal for the issue to be raised at the G8 summit.
U.S. crude oil fell 1.6 percent to $67.66 a barrel.
'The overall economic sentiments are very weak so oil prices could see more selling pressure. Furthermore, prices have also jumped more than 40 percent in the last quarter, so investors would be happy to lock in profits,' said Benson Wang, trader at Commodity Broking Services in Sydney.
(Additional reporting by Natsuko Waki)
(To read Reuters Global Investing Blog click on http://blogs.reuters.com/globalinvesting; for the MacroScope Blog click on http://blogs.reuters.com/macroscope; for Hedge Hub click on http://blogs.reuters.com/hedgehub)
Keywords: MARKETS GLOBAL
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