(Recasts with U.S. markets, adds byline; dateline previous
LONDON)
* U.S., European stocks fall on oil surge, economy jitters
* Concerns about Iran nuclear program weigh on oil market
* Bonds erase losses as job losses less than expected
* Dollar rises on better outlook than euro
By Herbert Lash
NEW YORK, Aug 1 (Reuters) - Surging oil and reports of
carmakers' woes fanned economic worries and hit global equities
on Friday, although the dollar managed a rise on the view that
Europe's economy is further from recovery than the United
States.
Crude futures rallied sharply as concerns about Iran and
its dispute with the West and Nigerian supply snags offset
indications demand for energy is faltering.
U.S. Treasury debt prices were mostly flat after data on
jobs and manufacturing suggested tougher times ahead for the
U.S. economy and reinforced the notion the Federal Reserve will
leave interest rates alone for the time being.
Bonds initially fell and stocks rose after the U.S.
government's jobs report for July that showed the labor market
shrank for a seventh straight month, but the loss of 51,000
jobs was smaller than forecast.
A reassessment of the jobs data reversed the rise in stocks
and halted the sell-off in bonds.
Jean-Marc Lucas, an economist at BNP Paribas in Paris, said
the U.S. data was mostly in line with recent months.
"The job losses are slightly lower than what we saw earlier
this year, but the unemployment rate is getting worse," Lucas
said. "It confirms that the job market is deteriorating and
there is no reason the believe that the trend will change over
the next few months, even over the next few quarters."
A profit warning from BMW and a $15.5 billion quarterly
loss at General Motors <GM.N> helped drive equity markets in
Europe and the United States lower. A number of global
carmakers reported sales slowing.
Platinum slid nearly 7 percent and palladium by more than 6
percent on the spate of poor results in the automotive sector
and firmer oil prices.
"Everybody expects car demand to be very low and the higher
oil price will dampen it further," said Commerzbank analyst
Eugen Weinberg.
GM shares initially fell as much as 10.6 percent in
reaction to the automaker's much bigger-than-expected quarterly
loss, the third-largest in its history.
But analysts credited GM with moving to cut costs and shore
up its cash position, helping shares to trim losses. They said
GM faces continued risks from a weak U.S. auto market now seen
slumping into 2010. The stock was off 4 percent after midday.
The Nasdaq fell more than 1 percent on biotech sell-off.
Shares of Biogen Idec <BIIB.O> fell more than 25 percent on
complications related to a multiple sclerosis drug, while Sun
Microsystems <JAVA.O> lost nearly 14 percent after a profit
warning. Sun also reported poor business computer sales.
Biogen was the biggest drag on the S&P 500. Two new brain
disease cases were detected in patients taking Tysabri, a
multiple sclerosis drug jointly manufactured with its Irish
partner Elan, whose shares plunged 46 percent.
Before 1 p.m., the Dow Jones industrial average <> was
down 66.76 points, or 0.59 percent, at 11,311.26. The Standard
& Poor's 500 Index <.SPX> was down 8.77 points, or 0.69
percent, at 1,258.61. The Nasdaq Composite Index <> was
down 22.00 points, or 0.95 percent, at 2,303.55.
BMW sank 5.3 percent after warning it would miss its 2008
targets and it posted a 44 percent drop in quarterly pretax
earnings.
Renault, which has a significant stake in Nissan, fell 3.4
percent, Daimler lost 2.1 percent and Volkswagen fell 4.1
percent.
But the heaviest negative weights on the FTSEurofirst 300
index were in the mining sector, with Rio Tinto losing 5.7
percent, Anglo American falling 5.3 percent and Xstrata
dropping 6 percent.
The FTSEurofirst 300 index of top European shares closed
down 1.38 percent at 1,163.73 points.
The dollar was lifted by the lastest economic data. Coupled
with other recent reports seen as surprisingly upbeat, the data
provides some scope for the Federal Reserve to raise interest
rates by year-end or early 2009 to tackle inflation.
Data from Europe and Australia has generally pointed to
deteriorating economic fundamentals.
"The contrast between Europe and the U.S. is becoming
starker and is more dollar favorable," said Marc Chandler, head
of global FX strategy at Brown Brothers Harriman in New York.
"We are not out of the woods by any means, but the price
action seems to indicate that many people are more inclined now
to sell euro rallies than to buy dips."
The dollar rose against major currencies, with the U.S.
Dollar Index <.DXY> up 0.23 percent at 73.365. Against the yen,
the dollar <JPY=> fell 0.21 percent at 107.59.
The benchmark 10-year U.S. Treasury note <US10YT=RR> rose
2/32 to yield at 3.95 percent. The 30-year U.S. Treasury bond
<US30YT=RR> fell 2/32 to yield 4.58 percent.
The euro <EUR=> was down 0.27 percent at $1.5558.
U.S. light sweet crude oil <CLc1> rose $1.62 percent to
$125.70 per barrel, after pulling back from bigger gains.
Spot gold prices <XAU=> fell $2.55 to $910.30 an ounce.
Gold recovered bigger earlier losses as oil prices rose,
boosting interest in commodities and fueling fears over
inflation.
Weak U.S. economic data and a grim outlook for Japanese
banks caused Asian stocks to sag overnight.
MSCI's index of Asia stocks outside Japan <.MIAPJ0000PUS>
fell 1.4 percent, and the Nikkei average <> fell 2.1
percent.
(Reporting by Walter Brandimarte, Richard Leong, Lucia
Mutikani and Gertrude Chavez-Dreyfuss in New York; Santosh
Menon, Jan Harvey, Kirsten Donovan in London and Blaise
Robinson in Paris)
(Writing by Herbert Lash. Editing by Richard Satran)
