While you were sleeping: US trade gap balloons

Equities on both sides of the Atlantic fell, while bonds rose, after a report showing the US trade deficit ballooned more than expected added to recent data on consumer sentiment and GDP that point to a slowing of US growth.

A Commerce Department report showed that the US trade deficit increased 43.1 percent in March, the largest gain in nearly two decades, to US$51.4 billion, the biggest since October 2008.

"It looks like we are going to have negative GDP for the first quarter, just based on trade, but we expect a robust rebound in the second quarter," Jacob Oubina, senior US economist at RBC Capital Markets in New York, told Reuters.

With signs of easing US growth, the Federal Reserve might not raise interest rates after all, or at least not as soon as some had anticipated.

The trade data also heightened attention for Friday's nonfarm payrolls report, which is expected to show US companies added 225,000 jobs in April with an unemployment rate of 5.4 percent.

"The US economy is navigating through a soft patch and high valuations are elevating the risk of being wrong so investor angst and concern remains high," Terry Sandven, who helps oversee US$126 billion as chief equity strategist at US Bank Wealth Management in Minneapolis, told Bloomberg.

In late trading in New York, the Dow Jones Industrial Average slid 0.89 percent, the Standard & Poor's 500 Index dropped 1.14 percent, while the Nasdaq Composite Index declined 1.51 percent.

Slides in shares of Intel and those of DuPont, last down 2.5 percent and 2.2 percent respectively, led the drop in the Dow.

It wasn't all bad news however. The Institute for Supply Management's non-manufacturing index rose to 57.8 last month, the highest since November, from 56.5 in March.

Shares of Microsoft fell, last 0.8 percent weaker, after Bloomberg reported the company was considering a bid for salesforce.com, citing people familiar with the matter.

In Europe, the Stoxx 600 Index ended the session with a 1.5 percent drop from the previous close. It gave up earlier gains of as much as 1.1 percent. The UK's FTSE 100 Index slid 0.8 percent, France's CAC 40 Index retreated 2.1 percent, while Germany's DAX dropped 2.5 percent.

In Greece, the ASE Index slumped 3.9 percent amid concern the country won't be able to fulfill the requirements to unlock another chunk of international financial aid before a May 12 deadline.

Oil climbed, rising to the highest level in 2015, as protesters in Libya disrupted crude flows. US crude settled at US$60.40 a barrel, after earlier in the day rising as high as US$61.10.

To be sure, some said the gains in crude might prove shortlived.

"I think the market is getting ahead of itself," Dominick Chirichella, senior partner at the Energy Management Institute in New York, told Reuters.

"There's plenty of producer hedging going on as well, and those production levels are not going to come down if demand projections are not met. This could simply mean we are setting ourselves up for another leg lower in prices."

(BusinessDesk)