Growth worries weigh on oil, stocks; dollar up

Thu Mar 22, 2012 4:43pm EDT
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By Walter Brandimarte

NEW YORK (Reuters) - Oil prices plunged nearly $2 per barrel and global stocks fell for a third consecutive session on Thursday as shrinking manufacturing in China and in the two largest economies of the euro zone fueled worries about global growth.

U.S. Treasuries prices and the dollar rose as risk aversion increased, although fresh evidence that the U.S. labor market continues to strengthen tempered investors' bid for safety.

China, the world's second-biggest economy and a key driver of growth, said its manufacturing sector shrank for a fifth straight month in March. A senior government economist said the economy is facing more downward pressure than had been expected.

In the euro zone, a recession seemed unavoidable after Germany and France reported unexpectedly sharp declines in manufacturing activity. Britain added to the gloom with a steeper-than-forecast fall in retail sales.

Fears that an economic slowdown could dent demand for energy drove U.S. crude oil prices down to a two-month low of $104.93 a barrel, a fall of $1.92, or 1.79 percent.

Some Wall Street indexes fell more than half a percentage point, although the S&P 500 retained its gain of 10.7 percent in the year to date.

"The stock market has been residing in this fantasy land, ignoring the bad data and only looking at the good ones, but it is now clear that Europe is entering a recession with Germany probably joining, and China could have a hard landing," said James Dailey, portfolio manager at TEAM Asset Strategy Fund in Harrisburg, Pennsylvania.

"We are not going to have a collapse like the '08, but there is a good chance that we have experienced the new highs and the market is starting to roll over to what may be the start of a bear market," he added.   Continued...

A woman smiles as she walks past an electronic board displaying graphs showing recent movements of Japanese market indices, outside a brokerage in Tokyo February 15, 2012. REUTERS/Yuriko Nakao