Stocks, euro sag as China GDP spooks investors

Fri Apr 13, 2012 4:28pm EDT
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By Richard Leong

NEW YORK (Reuters) - U.S. stocks closed out its worst week this year and the euro fell on Friday after disappointing Chinese growth data stoked worries about the strength of the global economy and a rise in Spain's borrowing costs revived fears about the debt-plagued euro zone.

A sharp re-emergence of fears over contagion from the euro zone debt crisis took a steep toll on bank shares in both Europe and the United States, as well as dragging down the euro against the dollar for the first time in three days.

The yield on Spain's 10-year government bonds came close to testing 2012 highs, and the cost to insure against a Spanish default jumped to a record high.

"Everyone is looking for global growth, but the slowing in China and the rising yields in Europe are creating questions about how strong we might expect it to be," said Brad Sorensen, director of market and sector analysis at Charles Schwab in Denver. "That's leading to a correction here, with financials especially taking a hit."

Reduced optimism about global growth spurred hedge funds and other investors to shift cash into safe-haven U.S. and German government debt ahead of the weekend, analysts and traders said.

China, the world's second-largest economy, reported first-quarter growth of 8.1 percent, the weakest in almost three years and below market expectations for an 8.3 percent rate. Market talk on Thursday that growth could come in at 9 percent had spurred a rally in riskier assets.

"The Chinese GDP number was weaker than expected, and everyone had used it as an excuse to rally yesterday," said Peter Boockvar, equity strategist at Miller Tabak & Co in New York.

Most commodities fell on Friday on concerns about slowing demand, but oil prices in London closed higher on a late flurry of buying, while equity markets fell on the fears about Europe.   Continued...

A man takes a photo of displays showing market prices at the Tokyo Stock Exchange in Tokyo April 11, 2012. REUTERS/Toru Hanai