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GLOBAL MARKETS-U.S. disappointment, dire data weigh on stocks

Published 02/12/2009, 07:21 AM
Updated 02/12/2009, 07:24 AM
BARC
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* MSCI world equity index down 1 percent at 208.32

* Banking, energy shares slip as U.S. plans disappoint

* 2-year euro zone yield hit record lows; yen firmer

By Natsuko Waki

LONDON, Feb 12 (Reuters) - Disappointment over a U.S. fiscal stimulus package and dire economic data around the world pushed world stocks to a one-week low on Thursday, driving the low-yielding yen and safer government bonds higher.

U.S. congressional negotiators reached a deal on Wednesday over the $789 billion plan on emergency spending and tax cuts, aimed at reversing a deep recession. The price tag was trimmed from $838 billion.

Investors have already given a thumbs down to another $2 trillion rescue package for banks from U.S. Treasury Secretary Timothy Geithner, announced earlier this week, saying it lacked specifics.

Economic data also soured the mood. Japanese wholesale prices fell for the first time in five years, fanning concerns the economy was on track for the second bout of deflation in a decade. Australia's jobless rate hit a two-year high while Spain reported its worst economic contraction in 15 years.

"(Governments are using) historically strong medicines to try to revive a patient that is looking very weak at the moment and so far almost everything that has been used has failed to work," said Henk Potts, equity strategist at Barclays Stockbrokers. MSCI world equity index fell 0.9 percent while the FTSEurofirst 300 index of leading European shares fell 1.6 percent, led by banking and energy shares. Emerging stocks dropped more than 1.6 percent.

U.S. crude oil fell 1.5 percent to $35.39 a barrel.

The dollar rose half a percent against a basket of major currencies. The yen rose 0.4 percent to 90.09 per dollar.

"The Japanese own more of the world than the world owns of Japan and when risk aversion rises people tend to bring money home," said Paul Robson, currency strategist at RBS.

"The Japanese have more money than most to bring home."

Inflows into safer government bonds pushed yields down across the board. Two-year euro zone government bond futures hit 1.326 percent, its lowest since the euro's launch in 1999. Speculation that the European Central Bank would cut interest rates next month also weighed on yields.

The March bund futures rose 56 ticks. (Additional reporting by Atul Prakash)

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