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While you were sleeping: UPDATED Stocks retreat on renewed global growth fears

Stocks slid, the yen strengthened and US bonds rose in a broad pullback from risk.

Margreet Dietz
Fri, 08 Apr 2016

US stocks declined amid renewed concern about the global economy and whether the world's central banks have hit a wall in efforts to bolster growth.

International Monetary Fund managing director Christine Lagarde warned that the global growth momentum was weak while risks were probably on the rise and confidence sorely lacking.

"The good news is that the recovery continues; we have growth; we are not in a crisis," she said in a speech in Frankfurt. "The not-so-good news is that the recovery remains too slow, too fragile, and risks to its durability are increasing.

"Let me be clear: we are on alert, not alarm. There has been a loss of growth momentum. However, if policymakers can confront the challenges, and act together, the positive effects on global confidence and the global economy will be substantial."

Also weighing on investors' minds is the strengthening of the Japanese yen, which touched a 17-month high against the US dollar amid bets the Bank of Japan won't intervene, even as it hampers its efforts to stoke the nation's economy and inflation.

Exporters bringing cash home are the main driver of the yen's 11% rally against the US dollar this year, not speculators, so selling the currency to weaken it would be ineffective, JPMorgan Chase & Co's Tohru Sasaki, head of Japan markets research at JPMorgan in Tokyo and former Bank of Japan official, told Bloomberg.

"Today, the yen is really the name of the game, because there are indications that Japan might not really be able to escape that funk that it's in," Jeff Weniger, senior portfolio strategist at BMO Private Bank in Chicago, told Reuters.

Dow recovers from 200-point drop
On Wall Street, the Dow Jones Industrial Average slid as much as 200 points before recovering to close 174.09 down, or 1.0%, at 17,541.96. The Nasdaq Composite Index dropped 1.5% to 4848.37 and the Standard & Poor's 500 Index declined 1.2% to 2041.92.

Declines in shares of Goldman Sachs and those of Verizon Communications, down 3.1% and 2.8% respectively, led the drop in the Dow.

The yield on the 10-year US Treasury note fell to 1.689%, its lowest level since February 11, compared with 1.753% on Wednesday.

Gold for April delivery rose 1.1% to $US1236.20 an ounce, its biggest gain since March 29. US crude lost 1.3% to $US37.26 a barrel. 

The US jobs market continued to offer signs of strength. A Labor Department report showed initial claims for state unemployment benefits fell 9000 to a seasonally adjusted 267,000 for the week ended April 2.

"The persistently low level of claims should provide some reassurance that the economy is growing, even if that growth appears more sluggish that most would have hoped a few months ago," Jim Baird, chief investment officer at Plante Moran Financial Advisors in Kalamazoo, Michigan, told Reuters.

In Europe, the Stoxx 600 Index ended the session with a 0.8% decrease from the previous close.

The UK's FTSE 100 Index gave up 0.4%, France's CAC 40 Index retreated 0.9%, while Germany's DAX Index fell 1%.

Shares of Fiat Chrysler Automobiles dropped 3.9% after the car maker said it would cut 1,300 jobs at a Michigan factory.


Margreet Dietz
Fri, 08 Apr 2016
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While you were sleeping: UPDATED Stocks retreat on renewed global growth fears