* Euro below $1.20 on fears debt crisis hitting Hungary
* U.S. jobs data frustration weighs on sentiment
* Oil prices slump below $73 a barrel on risk aversion
* Government debt prices rally on safe-haven buying
(Updates with European markets close)
By Walter Brandimarte
NEW YORK, June 4 (Reuters) - The euro slumped below $1.20
for the first time in more than four years on Friday and global
stocks slid as investors feared Hungary could become the next
casualty in an escalating European debt crisis.
Disappointing growth in U.S. payrolls in May added to
doubts about the sustainability of the economic recovery,
driving investors to the perceived safety of U.S. and German
government bonds.
The aversion to risk weighed heavily on commodities, with
oil sinking more than 3.5 percent to below $72 a barrel.
Hungary, perceived as the weak link in Eastern Europe due
to its high debt ratios, spooked investors again on Friday when
a spokesman for the prime minister said recent comments about a
Greek-style debt crisis there were not exaggerated.
European banks with exposure to Eastern Europe were hit
hard, adding pressure to the pan-European FTSEurofirst 300
<> index of top shares, which closed lower after four
consecutive sessions of gains.
"The market is reacting to disappointing jobs report and
Europe. The story about Hungary facing budget pressures is just
another in a line of worries coming out of Europe," said
Michael Sheldon, chief market strategist at RDM Financial in
Westport, Connecticut.
The euro <EUR=> was down 1.36 percent at $1.1992, also
pressured by comments by French Prime Minister Francois Fillon,
who said he only saw "good news" in the parity between the
European single currency and the dollar. []
Fillon's remarks were later clarified by a source, who said
his reference to "parity" was about the general evolution of
the exchange rate between the euro and the dollar.
[]
Stocks added to losses once the European single currency
pierced the psychological level of $1.20. The euro fell as low
as $1.1972, according to EBS trading platform.
MSCI's all-country world equity index <.MIWD00000PUS> fell
about 2 percent.
The Dow Jones industrial average <> slumped 236.92
points, or 2.31 percent, at 10,018.36, while the Standard &
Poor's 500 Index <.SPX> sank 24.92 points, or 2.26 percent, to
1,077.91. The Nasdaq Composite Index <> was down 49.88
points, or 2.17 percent, at 2,253.15.
Financial stocks were among the worst performers, with both
the KBW Banks index <.BKX> and S&P Financial sector <.GSPF>
down more than 2 percent.
In Europe, the FTSEurofirst 300 <> index of top
shares closed down 1.86 percent at 998.60 points, led lower by
banking stocks.
Shares of French bank Societe Generale <SOGN.PA> fell 7.6
percent concerns about the firm's derivatives operations. A
bank spokesman said there was nothing to be said about the
matter. []
Banks with exposure to eastern European countries fell,
with Raiffeisen International <RIBH.VI> and Erste Group Bank
<ERST.VI> down 8.3 percent and 7.8 percent respectively.
Most stocks of banks with a significant exposure to Eastern
Europe feature among Europe's biggest losers so far in 2010,
with Societe Generale down about 35 percent and Raiffeisen down
21 percent.
They have been underperforming the STOXX Europe 600 Banks
<.SX7P>, which is down 15.3 percent year-to-date.
Emerging market stocks were 0.9 percent lower according to
a MSCI index <.MSCIEF>.
Stocks were already under pressure as the U.S. Labor
Department said nonfarm payrolls in May rose by 431,000, far
below a consensus estimate for 513,000 new jobs.
Although payrolls last month grew at their fastest pace in
10 years, buoyed by temporary hiring for the decennial census,
private hirings slowed sharply as businesses opted to increase
hours rather than take on new workers.
"The market is bothered by the fact that you had a smaller
headline gain in private payrolls, and very little of it was in
the services sector," said Cary Leahey, senior managing
director at Decision Economics in New York.
Investors rushed into assets considered safer after the
jobs data, pushing 10-year Treasury notes <US10YT=RR> up 42/32
in price. Yields on the benchmark bond fell to 3.2132 percent
from 3.37 percent on Thursday.
The aversion to risk also drove currency trade, with
investors buying currencies perceived as safe-havens, such as
the yen and Swiss franc.
"The euro was already getting hammered on worries about
Hungary and with the nonfarm payrolls not living up to
expectations, the risk trade is under assault from every
angle," said Boris Schlossberg, director of currency research
at GFT Forex, in New York.
The dollar was about 0.9 percent lower at 91.86 yen, after
hitting a session low of 91.69 yen according to Reuters data.
The yen also rose against the euro and the Australian and
New Zealand dollars.
Spot gold <XAU=> rose 0.72 percent to $1,216.20 an ounce,
after touching a session low of $1,196.65 an ounce.
Assets seen as higher risk fell. Copper fell to near a
five-month low, and U.S. crude oil futures fell 3.27 percent,
to $72.17 per barrel.
(Editing by Leslie Adler)
