Major stock markets and the dollar fell yesterday after unexpectedly weak growth in US private-sector jobs and services dented optimism about the world’s largest economy.
Crude prices slumped more than two per cent as oil stockpiles swelled in the United States, the top oil consumer, where a struggling economy is limiting demand for fuel.
US companies hired at the slowest pace in five months in March as recent strong demand for construction jobs evaporated, according to a private-sector report. Separate data showed the pace of growth in the vast U.S. services sector slowed last month.
The data sparked concern that the recent pick-up in US economic growth is losing momentum and injected caution among investors ahead of Friday’s all-important government report on employment for March.
“The softer-than-expected figure adds further support to our long-held view that the US economy would slow towards mid-year, seeing sub-2 percent GDP growth in the second quarter,” said Andrew Grantham, economist at CIBC World Markets in Toronto. “This is a negative for stocks and the U.S. dollar, but a positive for fixed income.”
Analysts polled by Reuters forecast US nonfarm payrolls grew by 200,000 in March, with the unemployment rate seen holding steady at 7.7 per cent.
The MSCI world stocks index slipped 0.5 per cent to 358.26.
Wall Street stocks fell, though the S&P 500 index remained close to its all-time intraday high.
“There are risks out there, but we’ve been creeping up quietly for a long time with an impressive cumulative gain, and that will continue so long as we don’t have a crisis in the offing,” said David Kelly, chief market strategist for JPMorgan Funds in New York.
The Dow Jones industrial average dropped 60.82 points, or 0.41 percent, to 14,601.19. The Standard & Poor’s 500 Index shed 10.27 points, or 0.65 per cent, to 1,559.98. The Nasdaq Composite Index fell 18.37 points, or 0.56 per cent, to 3,236.49.
European shares lost 0.9 per cent to close at 1,193.30 points, a day after surging 1.3 per cent, as the weak US data stoked worries that global economic growth would struggle to justify recent stock market gains.
The dollar index, which measures the greenback versus a basket of currencies, dropped 0.2 per cent to 82.724.
The euro rose 0.2 per cent to $1.2845, while against the yen the dollar fell 0.5 per cent, to 92.95 yen.
The European Central Bank and the Bank of Japan are both expected to make monetary policy announcements today.
Analysts said a recent run of weak euro zone data, political turmoil in Italy, and concerns over Cyprus could lead ECB President Mario Draghi to strike a dovish tone in his comments after the meeting.
The BOJ is widely expected to ramp up its bond buying and extend the maturities of the bonds it purchases, although some traders have pared back bets against the yen given already hefty short positions.
“There’s some event risk associated with the (BOJ) announcement. The concerns over Europe have also intensified as economic data continue to reflect recessionary conditions there,” said Michael Woolfolk, senior currency strategist at BNY Mellon in New York.