* U.S. and Chinese economic data disappoint, markets drop
* S&P 500 hits 10-month low, off 16 pct from April peak
* Crude oil prices tumble on low growth outlook, gold down
By Daniel Bases
NEW YORK, July 1 (Reuters) - Weak economic data from the
United States and China spurred investors to dump shares and
oil on Thursday as concerns harden that the global economy is
entering a new downturn.
The U.S. dollar tumbled against the euro and hit a
seven-month nadir against the yen. Gold prices were slightly
weaker, indicating investors are finding few places to wait out
the turmoil that is rife with deflationary forces.
U.S. and European government bond prices rose, benefiting
from investor caution. Benchmark 10-year U.S. yields fell to
14-month lows.
In the United States, contracts for pending sales of
previously owned homes plunged a record 30 percent in May, far
more than expected, after a popular tax credit expired.
[]
Additionally, new claims for U.S. jobless benefits rose
unexpectedly in the last week, a day ahead of an the key June
employment report which is expected to show the first decline
this year, according to a Reuters poll. []
Growth in U.S. manufacturing activity in June slowed to its
lowest level since December 2009, while an official survey
showed the pace of Chinese manufacturing activity last month
was the weakest since February. []
"The data plays not only on the economic slowdown story but
also the deflationary/disflationary story. Equities have
extended their earlier losses and the bond market finds
support." said Marc Chandler, head of currency strategy at
Brown Brothers Harriman in New York.
U.S. share prices fell to 10 month lows, with the Standard
& Poor's 500 stock index <.SPX> dropping 16 percent from its
recent April peak.
In mid-morning New York trade, the Dow Jones industrial
average <> fell 93.41 points, or 0.96 percent, at 9,680.61.
The S&P 500 Index lost 13.04 points, or 1.27 percent, at
1,017.67. The Nasdaq Composite Index <> dropped 32.74
points, or 1.55 percent, at 2,076.50.
S&P's financial share index <.GSPF> dropped 2.59 percent.
The pan-European FTSEurofirst 300 <> index of top
shares increased their losses after the weak U.S. economic
data, dropping 2.5 percent to 968.53.
Investors, however, took heart at the outcome of the
European Central Bank's offering of six-day loans, which saw
banks borrow 111.2 billion euros ($136.1 billion), a figure
that analysts said did not set off alarm bells.
Investors were worried that European banks are too reliant
on ECB funds, especially with the expiration of 442 billion
euros of one-year loans on Thursday.
EURO REBOUNDS
The euro found more buyers after the economic data and
reversed declines to gain on both the U.S. dollar and the yen.
Commodity-based currencies like the Australian dollar fell on
the expectation demand for raw materials will drop as growth
slows.
The euro surged to a five-week high of $1.2473 before
slipping back to $1.2446 <EUR=> for a gain of 1.73 percent on
the day. The euro gained 0.43 percent to 108.60 yen <EURJPY=>.
"We are still seeing risk aversion in some currencies such
as the dollar and the yen" after the U.S. economic data, said
Kathy Lien, director of research at GFT Forex in New York.
"But there is a different reaction in the euro, which is
partly a short squeeze and secondly, the market turning against
the dollar ahead of non-farm payrolls," Lien said.
The Aussie dollar <AUD=D4> shed 0.4 percent to $0.8369.
Oil prices fell for a fourth consecutive day, down 4.5
percent at $72.23 a barrel <CLc1>. Spot gold prices fell
$17.25, or 1.39 percent, to $1224.10 <XAU=>.
Benchmark 10-year U.S. Treasuries <US10YT=RR> rose 13/32 of
a point in price, driving the yield down to 2.892 percent as
the grim economic data reinforced low inflation expectations.
In Europe, the September Bund future <FGBlc1> was up 11
ticks on the day at 129.50.
(Additional reporting by Nick Olivari, George Matlock, Ian
Chua, Blaise Robinson, Kevin Plumberg, Naomi Tajitsu and
William James; Editing by Padraic Cassidy)
