Economy fears hit shares; bonds rally

Thu Jul 12, 2012 4:56pm EDT
 
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By Leah Schnurr

NEW YORK (Reuters) - Fears about the world economic outlook hurt global shares on Thursday as the euro fell to a new two-year low and investors pushed into safe-haven U.S. government bonds.

U.S. benchmark debt yields neared historic lows as prices extended gains in the afternoon after the sale of $13 billion of reopened 30-year Treasury bonds brought a record low auction yield.

Jitters about what the euro zone crisis and softer economy will mean for company profits bruised Wall Street, though stocks came off their lows on a rally in Procter & Gamble (PG.N: Quote).

"The (bond) price strength continues," said Mary Ann Hurley, vice president for fixed income trading at D.A. Davidson & Co in Seattle.

"Europe unquestionably continues to be a factor, but now the viewpoint is shifting to one that the global economy is slowing down greatly and that many central banks are going to have to conduct additional (monetary) easing moves."

There was some solace from data that showed the number of Americans applying for jobless benefits fell last week to a four-year low, though some of that improvement may be temporary.

But analysts said it did little to sway the view the economic recovery has hit a soft patch.

The weaker-than-expected start to the second-quarter U.S. corporate reporting season, combined with expectations of slower economic growth in the world's leading economies, had encouraged hopes the Federal Reserve would resume a policy of creating money to lower long-term interest rates, known as quantitative easing, or QE3.   Continued...

 
Visitors look at monitors displaying market indices at the Tokyo Stock Exchange in Tokyo May 18, 2012. REUTERS/Yuriko Nakao