Dismal jobs data hits stocks; Treasuries soar

(Reuters) - Stock markets around the world fell on Friday and oil prices slumped as a dismal report on America's labor market disappointed investors expecting a stronger recovery in the world's largest economy.

Gold capped its best week of the year and investors rushed into U.S. Treasury debt, turning safe-haven investments into the day's top performers.

The U.S. Labor Department said the country's non-farm payrolls -- a key indicator for global markets -- grew by only 18,000 in June, the weakest reading since September, and well below economists' expectations of a gain of 90,000.

"It's a terrible number. There is no good news you can glean from it," said David Semmens, U.S. economist at Standard Chartered in New York.

U.S. stocks' benchmark S&P 500 index fell almost 1.0 percent, erasing much of the gains over the last two sessions.

Anxiety about another recession spurred a stampede into short-term interest-rate futures. Investors now expect the Federal Reserve will keep interest rates near zero into late 2012 to support the fragile economy.

The spot price of gold shot up almost 1.0 percent for the day. Longer-dated Treasuries surged a full point or more, while the yield on the benchmark 10-year note hovered at around 3.0 percent.

In commodity markets, U.S. crude oil futures prices closed down 2.5 percent, the most in two weeks, and in currencies, the dollar fell against the yen and Swiss franc.

On Wall Street, the Dow Jones industrial average .DJI was down 62.29 points, or 0.49 percent, at 12,657.20. The Standard & Poor's 500 Index .SPX was down 9.42 points, or 0.70 percent, at 1,343.80. The Nasdaq Composite Index .IXIC was down 12.85 points, or 0.45 percent, at 2,859.81.

Global stock prices retreated from five-week highs to head lower. European stocks slid as the negative sentiment emanating from the U.S. jobs report added to worries about the euro-zone banking sector in Greece, Portugal and Ireland in particular.

The MSCI world equity index .MIWD00000PUS shed 0.8 percent to 344.64. The FTSEurofirst 300 index .FTEU3 also slid 0.8 percent to close at 1,114.44. An index of emerging market stocks .MSCIEF hit a two-month high before slipping 0.4 percent to 1,163.50.

The U.S. dollar fell as low as 80.48 yen following the jobs data, from a session high of 81.48 yen. Against the Swiss franc, the greenback was last trading down 0.9 percent at 0.8367 francs.

The price of the 30-year U.S. Treasury bond rose after the June payrolls report fueled bets on tame inflation and the Federal Reserve keeping interest rates low for longer than previously thought. The long bond surged almost 1 1/2 points - or 1-14/32 in price to 101-19/32, while its yield slid to 4.28 percent late Friday afternoon, from 4.37 percent late on Thursday.

The benchmark 10-year U.S. Treasury note gained 1-1/32 in price to 100-29/32, while its yield declined to 3.02 percent from 3.14 percent on Thursday.

In European debt markets, German Bunds rallied and the bonds of some poorer nations came under pressure as concerns over slow progress on a second Greek fiscal bailout and the health of European banks underpinned demand for safe-haven assets.

Oil prices slid in volatile trade after the U.S. payrolls data dashed hopes of investors who had positioned themselves for a much stronger number.

U.S. crude oil tumbled 2.5 percent to settle at $96.20 a barrel, having erased all of Thursday's gains. London's Brent closed down 0.3 percent at $118.33 a barrel, as concerns over the tighter supply for that type of crude helped it perform better than U.S. crude.

Posted in: Business-Economic