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GLOBAL MARKETS-Growth fears knock stocks, US dollar; gold up

Published 04/14/2011, 11:52 AM
Updated 04/14/2011, 11:56 AM
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* Investors pare growth outlook on Greek debt worry

* Chinese inflation, weak Japanese and US data also weigh

* Gold, bonds attract safehaven flows

* U.S. oil prices rise on weaker dollar

(Updated market action, adds fresh quote)

By Richard Leong

NEW YORK, April 14 (Reuters) - Stocks on major world markets fell and the U.S. dollar slipped 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 shifted funds into less risky 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 0.3 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 that 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> fell 0.5 percent on the day, while Wall Street stocks were <.SPX> down 0.3 percent.

In Tokyo, the Nikkei <.N225> bucked the trend, closing 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. Investors are particularly concerned about Chinese inflation in case the government attempts to restrain it by raising interest rates prompts a 'hard landing' for the economy.

"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.

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]

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. For more, see [ID:nN14146589]

Renewed anxiety over the U.S. economy hurt the dollar, which fell against the yen at 83.26 yen . The ICE U.S. dollar index <.DXY> was down 0.2 percent, trimming earlier losses linked to the weaker-than-expected claims data. [FRX/]

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

U.S. oil prices were up 59 cents at $107.69 a barrel. But in London, Brent crude was stuck in the red, down 43 cents at $122.45. For more, see [O/R]

Gold prices jumped to $1,467.77 an ounce, up from $1,454.61 late on Wednesday.

In bond trading, U.S. Treasury priced turned lower, as traders prepared room for $13 billion of 30-year bonds. The benchmark 10-year yield firmed 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 120.69, the highest in more than a week. For more, see [ID:nLDE73D1DA]

(Additional reporting by Ryan Vlastelica and Gertrude Chavez-Dreyfuss in New York; Jeremy Gaunt, Jan Harvey, Nia Williams in London)

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