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GLOBAL MARKETS-Growth anxiety depresses stocks, US dollar

Published 04/14/2011, 03:31 PM
Updated 04/14/2011, 03:36 PM
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* Investors trim growth outlook on Greek debt worry

* Chinese inflation, weak Japanese and US data also weigh

* Economists see global expansion on track - Reuters poll

* Gold, bonds attract safehaven flows; oil up on dollar

(Update market prices)

By Richard Leong

NEW YORK, April 14 (Reuters) - Stocks on major world markets and the U.S. dollar fell on Thursday as Greece's debt problem, Chinese inflation and disappointing U.S. jobs data stoked worries over a global economic slowdown.

Bonds and gold rose as uneasy investors sought safehaven from stocks and riskier investments.

"We do have to scale back growth expectations. The market is more concerned about what growth will be like with rising input costs," said Jerry Webman, senior investment officer and chief economist at OppenheimerFunds in New York. "People are looking at 'risk-off' trades."

U.S. oil prices climbed on the weaker dollar.

World stocks, as measured by the MSCI world index <.MIWD00000PUS> shed 0.2 percent despite a burst of corporate activity that would usually lift investors' spirits. On a year-to-date basis, the index was still up 4.1 percent.

While investors fret over a global slowdown, economists in the latest Reuters poll predicted world growth of 4.2 percent this year and 4.3 percent in 2012, unchanged since the January poll. See [ID:nLDE73D0XY]

European stocks <.FTEU3> closed down 0.6 percent on the day, while Wall Street stocks dipped 0.1 percent, though they were off earlier lows.

Investors, despite their reservations about the global economy, snapped up shares of Zipcar Inc. in its debut on Nasdaq. Shares of the U.S. car-sharing company rose more 50 percent at $27.83. For more, see [ID:nN14149168]

In Tokyo, the Nikkei <.N225> closed up 0.1 percent after Wednesday's late gains in the U.S.

Selling in European stocks emerged on a report that Chinese inflation would re-accelerate after slowing recently. Hong Kong's Phoenix TV, citing an unnamed source, said China's annual rate of inflation in March was likely to be 5.3 percent to 5.4 percent, a 32-month high and just above an estimate in a Reuters poll. [ID:nL3E7FE0EO]

"In emerging markets especially China, they rely on high levels of oil imports. They import a lot of oil products into the manufacturing sector," said Chris Ferrarone, global equity strategist with UBS in Stamford, Connecticut.

Investors are particularly concerned about Chinese inflation in case the government attempts to restrain it by raising interest rates, prompting a 'hard landing' for the economy.

Stunningly huge figures on China's foreign exchange reserves and money supply growth also fanned worries how aggressively Beijing will confront inflation. For more, see [ID:nLDE73D17Q]

PERIPHERAL WORRIES

Stock losses grew as Greek bond yields soared, with short-dated paper coming under the most intense pressure, as markets priced in a greater probability that Athens would be forced to restructure its runaway debt.

Yields of other peripheral euro zone states also rose sharply. [ID:nLDE73D153]

A year ago, the deterioration of Europe's sovereign debt problem held back the global recovery and forced the European Central Bank to leave policy rates steady for longer.

Adding to jitters over the bailout cost in Europe was the toll on Japan from last month's deadly quake and tsunamis.

The Reuters Tankan survey of 400 large firms found on Thursday that power shortages caused by the crippled Fukushima nuclear plant had hit nearly 60 percent of local companies, disrupting production and supply chains. [ID:nnLME7DP00Q]

In the U.S., the surprise rise in jobless claims raised doubts over the recovery in the labor market. [ID:nN14146589]

Renewed anxiety over the U.S. economy hurt the dollar, as traders bet the Federal Reserve will stick to an ultra-easy policy even as other major central banks raise rates to curb rising price pressures.

The ICE U.S. dollar index <.DXY> was down 0.4 percent and touched a 16-month low. [FRX/]

The weaker dollar supported oil value, despite worries over less demand if the world economy slows.

U.S. oil prices jumped $1.27 above $108 a barrel. But in London, Brent crude was stuck in the red, down 48 cents at $122.40. For more, see [O/R]

Gold prices gained 1 percent on the day to $1,472.10 an ounce.

In bond trading, U.S. Treasury prices fell in a choppy session, despite strong demand at $13 billion auction of 30-year bonds. The benchmark 10-year yield last traded at 3.48 percent after touching its lowest level in about 1-1/2 weeks earlier. For more, see [US/]

German Bund futures were up 0.2 percent at 120.67, the highest in more than a week. For more, see [ID:nLDE73D1DA]

(Additional reporting by Ryan Vlastelica, Gertrude Chavez-Dreyfuss, Gene Ramos, Robert Gibbons and Frank Tang; Editing by Chizu Nomiyama)

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