* Stocks tumble on weaker-than-expected U.S. job data
* Dollar declines in broad flight
* Gold demand on the rise, wheat futures fall
(Updates prices)
By Al Yoon
NEW YORK, Aug 6 (Reuters) - World stock markets and the
dollar slumped on Friday as investors fled to safe-haven bonds
and gold after U.S. employment data signaled the economic
recovery was losing traction.
The U.S. economy lost 131,000 jobs in July as more
temporary U.S. census jobs ended, and private employers added
fewer workers to their payrolls than expected in July. For
details, see []
U.S. employment has become a major focus for investors as
the economy shows signs of weakness while U.S. and European
companies report strong profits.
"Initial market reactions signal concerns about the impact
of the poor employment picture on spending, corporate revenues
and sustainable profitability," said Mohamed El-Erian, co-chief
investment officer at Pacific Investment Management Co in
Newport Beach, California.
"The U.S. Treasury market has been pricing in the muted
growth outlook ... and the equity markets are now catching up,"
El-Erian added.
The Dow Jones industrial average <> dropped 141.03
points, or 1.32 percent, to 10,533.95 and the Standard & Poor's
500 Index <.SPX> declined 15.72 points, or 1.40 percent, at
1,110.09, falling below its 200-day moving average.
The Nasdaq Composite Index <> slipped 29.41 points, or
1.28 percent, to 2,263.65.
Consumer stocks were among the biggest losers as the jobs
report added to worries about consumer spending, while a drop
in oil prices weighed on the energy sector. The S&P consumer
discretionary index <.GSPD> fell 1.6 percent and energy shares
<.GSPE> lost 1.8 percent.
Kraft Foods Inc <KFT.N> was a bright spot, gaining 1.8
percent to $30.20 after it reported higher-than-expected
quarterly profit and raised its target for cost savings from
the acquisition of Cadbury. [].
In Europe, the pan-European FTSEurofirst 300 index <>
declined 1.1 percent after a 0.4 percent gain before the U.S.
jobs data.
World stocks as measured by MSCI <.MIWD00000PUS> dropped
0.6 percent. The Thomson Reuters global stock index
<.TRXFLDGLPU> fell 0.7 percent.
Safe-haven bellwethers gained, with gold rising and yields
on U.S. and German benchmark bonds declining.
U.S. benchmark 10-year Treasury debt yields fell to a
15-month low, while two-year note yields dipped to a record low
of 0.50 percent after the payrolls report.
In late morning in New York, the 10-year yield <US10YT=RR>
was at 2.83 percent, down from 2.90 percent on Thursday. Gold,
<XAU=> rose $12.65, or 1.06 percent, to $1,206.70 an ounce.
The U.S. dollar fell to 85.20 yen <JPY=>, approaching a 15-year low, and fell against the euro at $1.3269 <EUR=> amid
economic growth.
DOLLAR DECLINES
The jobs report "increases the odds of the Federal Reserve
having to implement fresh stimulus measures to jump-start the
recovery," said Joe Manimbo, an analyst at Travelex Global
Business Payments in Washington. "Nothing is in there to argue
for a firmer dollar."
The dollar declined against a basket of major
trading-partner currencies, with the U.S. Dollar Index <.DXY>
down 0.6 percent at 80.349.
Investors are concerned the U.S. economy is slipping back
from recovery and threatening to take the rest of the world
with it. In recent weeks, however, investor sentiment has been
boosted by a series of generally positive earnings reports,
particularly from the financial sector.
Among the latest were part-nationalized Royal Bank of
Scotland Group PLC <RBS.L>, which reported a second-quarter
operating profit of 869 million pounds, and Europe's biggest
insurer, Allianz SE <ALVG.DE>, which had stronger-than-expected
operating profit.
In commodities markets, wheat markets tumbled, posting
their biggest daily percentage loss in nearly four months as
investors took profits a day after panic buying pushed prices
higher after Russia's suspended grain shipments due to its
worst drought in a century.
Chicago Board of Trade (CBOT) front-month <Wc1> wheat
futures were down 5 percent at $7.43 per bushel but below
two-year highs as markets reacted to Russia's ban on grain
exports. [].
In other commodities, U.S. light sweet crude oil <CLc1>
fell 1.1 pct to $81.13 per barrel.
(Additional reporting by Jennifer Ablan, Leah Schnurr and
Steven C. Johnson in New York, and Rod Nickel in Winnipeg;
Editing by Kenneth Barry)
