NEW YORK (Reuters) - Stocks on major exchanges fell on Friday and the euro hit 5-week lows after U.S. jobs data for June came in weaker than expected, fueling concerns that Europe’s debt crisis is deepening a slowdown in the U.S. economy.
News that the world’s largest economy created just 80,000 jobs in June - far fewer than needed to bring down the 8.2 percent unemployment rate - added to evidence that Europe’s debt crisis was weighing on global growth.
The gloomy jobs report stirred speculation that the Federal Reserve would have to resort to new stimulus to rescue the economy. But the specter of more easing did not stop the dollar from rallying, amid the broad flight from risk.
Oil and copper prices fell, along with gold. U.S. and German government bond prices leapt, with investors seeking safe havens in U.S. Treasuries and German bunds.
“The market is really focused on economic numbers that were less than desirable and it has just been off all day,” said Stephen Carl, head equity trader at The Williams Capital Group LP in New York.
“I don’t think they (the Fed) want to quite do things right yet but they certainly potentially can to breathe life back into things. But you always know that it’s not necessarily always the answer and it doesn’t always come to fruition.”
The jobs report followed news this week that U.S. manufacturing shrank in June and service sector growth slowed to its lowest level since January 2010, which might spur speculation the Fed will take more action to stimulate the economy.
Though Fed action might cheer some investors if it were to come, many are starting to doubt the ability of central banks to counter the dismal global economy.
Monetary policy loosening on Thursday by a trio of major central banks failed to impress investors. China, the euro zone and Britain all announced stimulus measures but to little avail.
Spanish borrowing costs also returned on Friday to unsustainable levels reached before last week’s EU summit that took measures specifically to ease Madrid’s burden.
Traders and investors are counting on the Fed to launch a third round of quantitative easing. The first two rounds involved large-scale Treasuries buying, aimed at lowering long-term interest rates.
Futures traders added to bets that the Fed will keep short-term interest rates near zero until the end of 2014. The U.S. central bank’s next policy meeting is scheduled for July 31-August 1.
In early afternoon trading, the Dow Jones industrial average .DJI was down 161.63 points, or 1.25 percent, at 12,735.04. The Standard & Poor’s 500 Index .SPX was down 15.57 points, or 1.14 percent, at 1,352.01. The Nasdaq Composite Index .IXIC was down 50.63 points, or 1.70 percent, at 2,925.49.
European shares fell after the U.S. jobs data .FTEU3. They were down 1.0 percent, having been 0.2 percent lower before the data. World stocks .MIWD00000PUS fell 1.3 percent.
The euro extended losses to a five-week low against the dollar, sliding nearly 1 percent to $1.2273 after falling as low as $1.2264.
The 19-commodity Thomson Reuters-Jefferies CRB index .CRB was headed for its sharpest loss in a week as oil and copper prices fell more than 2 percent each.
Gold slid 1.5 percent as investors turned to the perceived safety of the dollar. The spot price of gold was at $1,578.71 per ounce, down from $1,604.33 at Thursday’s close.
Benchmark U.S. 10-year Treasury note yields were at 1.5389 percent, the lowest in four days <US/>. Two-year German bond yields, hit negative territory for the first time on record.