Investors stampede to safe government debt, stocks drop

Fri Jun 1, 2012 8:29am EDT
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By Carolyn Cohn

LONDON (Reuters) - Treasury yields hit their lowest in hundreds of years and global stocks dropped towards 2012 lows on Friday, as investors scrambled for lifelines on worries about Spain's parlous finances and China's growth outlook.

U.S. stock futures pointed to a sharply lower open, with futures for the S&P 500, Dow Jones and Nasdaq 100 down between 0.8 and 1.2 percent.

With euro-zone debt signals flashing red again and Chinese demand seen slowing, record after record has tumbled across asset classes as investors seek security for their cash.

The German two-year bond yield fell below zero for the first time, meaning investors are paying for the right to hold that debt. Other "safe havens" Denmark and Switzerland said they were prepared to set negative interest rates to prevent their currencies spiraling.

U.S. 10-year Treasury yields fell to 1.524 percent <US10YT=RR, hitting their lowest on record - going back more than two centuries, according to Reuters data - for a second day.

Oil fell below the psychologically key level of $100 a barrel LCOc1, striking an eight-month low.

"We've had constant worries about Greece, Spain, the euro, poor data from the U.S., and overnight the Chinese data was not positive," said Tony Machacek, an oil futures broker at Jefferies Bache.

The next focus is U.S. employment data at 8:30 a.m. EDT (1230 GMT), forecast to show a 150,000 rise in non-farm payrolls in May. London-based investors were also adjusting positions ahead of market holidays on Monday and Tuesday.   Continued...

A graph is seen above a worker as he puts the finishing touches to a stage decoration for an investment funds awards dinner at the Madrid stock exchange May 17, 2012. REUTERS/Paul Hanna