US stocks, oil prices slide on economic worry

NEW YORK: US stocks dropped sharply and crude prices fell below US$44 a barrel on Dec 4 after dismal economic news on both sides of the Atlantic renewed worries about the severity of a global slowdown.

Longer-dated US government debt prices advanced ahead of what is expected to be a weak US employment report for November on Friday, and after European central banks aggressively cut interest rates.

Oil fell more than 6% to its lowest level in nearly four years in response to bleak US and European data, which could spell a deeper decline in energy demand worldwide.

"What we're seeing is a manifestation of a broader economic slowdown that's affecting all market sectors," said Fred Dickson, market strategist for DA Davidson & Co.

The number of US workers on jobless benefits rolls hit a 26-year high in November, while leading US retailers, with the exception of Wal-Mart Stores Inc, reported lower sales last month.

Wal-Mart was one of only five stocks on the 30-component Dow to rise. Its gain was overshadowed by other corporate news, including a deluge of US and European job cuts that signalled the recession is worsening.

Top US phone company AT&T Inc said it would eliminate 12,000 jobs, and chemical maker DuPont Co, announced it was cutting 2,500.

In Europe, Swiss bank Credit Suisse announced 5,300 layoffs and Japanese broker Nomura Holdings said it would cut 1,000 jobs in London.

The Dow Jones industrial average closed down 215.45 points, or 2.51%, at 8,376.24. The Standard & Poor's 500 Index fell 25.51 points, or 2.93%, at 845.23. The Nasdaq Composite Index was down 46.82 points, or 3.14%, at 1,445.56.

The FTSEurofirst 300 index closed 0.4% lower at 826.71 points in a choppy trade.

Miners were one of the top losers on the index, tracking lower metal prices. Xstrata fell 8.8%, Antofagasta fell 4.4% and Rio Tinto was off 5.3%.

France announced a €26 billion (RM120.52 billion) stimulus plan for its faltering economy as unemployment rose, the latest European country to open state coffers to fight the downturn.

"We are not in a normal environment. We are facing the most severe recession since 1930s. Once confidence is broken it takes a lot of time and a lot of interest rate cuts to get back," said Franz Wenzel, strategist at AXA Investment Managers, in Paris.

Oil prices have plunged more than US$100 (RM363) a barrel from an all-time high of more than US$147 in July as the global credit crunch has reduced energy needs in large consumer nations.

US light crude fell US$3.12 to settle at US$43.67, the lowest since Jan 5, 2005. London Brent crude fell US$3.16 settling at US$42.28.

Investor sentiment ebbed on the wave of economic data showing a spreading slowdown.

"Relentless negativity is pressuring the oil complex," said Mike Fitzpatrick, a vice president at brokerage MF Global.

Yields on euro zone government debt rose from multidecade lows this week after investors in Europe said the European Central Bank, the Bank of England and the Swedish central bank didn't go far enough when they slashed rates.

US government debt rallied on a safe-haven bid in face of the latest batch of dour European and US economic news pointing to a global downturn that could be the sharpest and longest since the downswings in the early 1980s.

The benchmark 10-year US Treasury note rose 29/32 in price, pushing its yield down to 2.56%. The 2-year US Treasury note rose 4/32 in price, with to yield 0.82%.

The Bank of England cut rates by a full percentage point to 2.0% and the ECB by 0.75 of a percentage point to 2.5%.

Sweden's Riksbank bolstered hopes for aggressive cuts, slashing its repo rate by a record 1.75 percentage points to 2.0%. But the ECB and BOE cuts failed to satisfy.

"Markets were certainly disappointed by (the ECB's) move today, given what the Riksbank did," said Investec's chief economist Philip Shaw.

The euro rose and sterling traded off a session low against the dollar even after the big European rate cuts.

The euro rose 0.51% at US$1.2779.

The dollar fell against a basket of major currencies, with the US Dollar Index down 0.28% at 86.539. Against the yen, the dollar fell 1.12% at 92.30.

Gold prices ended lower. Gold futures for February delivery settled down US$5 at US$765.50 an ounce in New York

Asian shares fell. The MSCI index of Asia-Pacific stocks outside Japan traded at break-even at day's end and Japan's Nikkei average fell 1%. -- Reuters

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