Fears of recession and credit failure battered global stocks and the dollar on Friday as sharp U.S. job losses and Federal Reserve attempts to boost liquidity painted a bleak picture of the world’s largest economy.
The dollar was at record lows against major currencies. Wall Street looked likely to open sharply lower and European stocks were down more than 1.5 percent after the U.S. Labor Department said U.S. employers had cut their payrolls for a second straight month during February.
U.S. employers slashed 63,000 jobs, the biggest monthly job decline in nearly five years.
Just before the report was released the Fed announced a number of measures to ease liquidity pressures in stressed financial markets, a move which led to some concern that market problems are worse than initially believed.
“This confirms the fears that have been lurking in the financial markets in recent weeks. The probability of a U.S. recession is at more than 50 percent. The Fed has to be more aggressive,” said Richard Dekaser, chief economist at National City Corp. in the U.S. city of Cleveland.
The U.S. news piled pressure onto investors who had already been selling riskier assets and seeking safety.
MSCI’s main world stock index, a benchmark for many professional investors, lost around 1 percent while its emerging market counterpart sank 2.3 percent.
The pan-European FTSEurofirst 300 was down nearly 1.8 percent. Earlier, Japan’s Nikkei average closed down 3.27 percent.
As well as fear about U.S. recession and its possible spillover to the rest of the world, investors got a sharp reminder on Thursday about continuing credit worries with news that Thornburg Mortgage Inc, a “jumbo” U.S. mortgage lender, was in default after failing to meet creditor demands for more upfront cash.
Another report that day showed U.S. mortgage foreclosures hit a record high in late 2007.
SINKING DOLLAR
The dollar tumbled to all-time lows again, with the euro powering to $1.5459 before easing back slightly to around $1.5390.
The euro was boosted by the European Central Bank’s signal on Thursday that it was in no hurry to start cutting interest rates in a month when the U.S. Federal Reserve is expected to slash them by 75 basis points.
The dollar also fell to an all-time low against the so-called dollar index, a trade-weighted basket of six major currencies, at 72.462 before lifting itself slightly. It has lost nearly 19 percent against this index over the past two years.The greenback also set an 8-year low around 101.44 yen.
All this drove investors into safe havens. Benchmark 10-year Treasury yields fell 7 basis points to 3.5204 percent. Two-year euro zone government bond yields were down 10 basis points at 3.222 percent as prices rose on demand.
The benchmark 10-year bond yield was down 4 basis points at 3.759 percent.
Demand for gold remained strong at around $979 an ounce, although it was off its record high of $991.90 hit during the day on Thursday.
Oil prices eased about 50 cents a barrel but were still at near-record highs above $104 a barrel. (Reuters)
