* Euro below $1.20 on fears debt crisis hitting Hungary
* Major US stock indexes sink over 3 pct; jobs data weighs
* Oil prices slump below $73 a barrel on risk aversion
* Government debt prices rally on safe-haven buying
(Updates with U.S. 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 while U.S.
stocks sank over 3 percent on fears 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 traditional safe havens of U.S. and
German government bonds.
The aversion to risk weighed heavily on commodities, with
oil sinking more than 4 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 new prime minister said recent comments
about a Greek-style debt crisis there were not exaggerated.
Stocks fell across the board to hit their lowest closing
levels. The Dow closed below 10,000 points and the S&P 500 slid
to its lowest level since early February.
"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.
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 euro <EUR=> was down 1.52 percent at $1.1972, 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.
[]
BANK FEARS
Stocks extended losses after the European single currency
pierced the psychological level of $1.20.
MSCI's all-country world equity index <.MIWD00000PUS> fell
2.8 percent.
The Dow Jones industrial average <> finished down
324.06 points, or 3.16 percent, at 9,931.22, while the Standard
& Poor's 500 Index <.SPX> lost 37.95 points, or 3.44 percent,
to 1,064.88. The Nasdaq Composite Index <> slid 83.86
points, or 3.64 percent, to 2,219.17.
Financial stocks were among the worst performers, with both
the KBW Banks index <.BKX> and S&P Financial sector <.GSPF>
down around 4 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 also
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 1.2 percent lower according to
a MSCI index <.MSCIEF>.
JOBS FRUSTRATION
Investors were also disappointed by data showing U.S.
nonfarm payrolls rose by 431,000 in May, far below a consensus
estimate for 513,000 new jobs as private sector hiring slowed
sharply.
Although payrolls last month grew at their fastest pace in
10 years, about 90 percent of the gains came from temporary
hiring for the decennial U.S. Census. Private-sector hiring was
hurt 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.
The services sector is the largest segment of the U.S.
economy.
Investors rushed into assets considered safer after the
jobs data, pushing 10-year Treasury notes <US10YT=RR> up 45/32
in price. Yields on the benchmark bond fell to 3.2023 percent
from 3.37 percent on Thursday.
German Bund futures rallied to a record high in after-hours
trading. The June contract <FGBLc1> jumped 113 ticks to
129.63.
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.
Against the Japanese yen, the dollar was 0.87 percent lower
at 91.84 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 0.97 percent to $1,219.30 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 4.15 percent,
to $71.51 per barrel.
(Additional reporting by Caroline Valetkevitch; Editing by
Leslie Adler)
