Stocks, bond yields fall on Greece worries, US data

Fri May 29, 2015 4:22pm EDT
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By Herbert Lash

NEW YORK (Reuters) - Global equity markets and bond yields both fell on Friday, as data showed the U.S. economy contracted in the first quarter and as investors were unnerved by mixed signals from Greece's debt talks.

In Europe, shares also fell on data showing that private loan growth in the euro zone stalled in April, while Wall Street shares reacted to details in the U.S. gross domestic product data indicating that after-tax corporate profits declined 8.7 percent in the first quarter.

Conflicting reports that Athens was close to clinching a reforms-for-cash deal with its creditors pushed German 10-year bond yields down 4 basis points to just under 0.50 percent.

"It's just Greece, Greece and Greece," said David Madden, a market analyst at IG in London. "The lack of news in either direction tells you why traders are sitting on their hands."

U.S. debt yields also dropped, with the 30-year U.S. Treasury yield falling to its lowest level in three and a half weeks, at 2.84 percent, while benchmark U.S. 10-year yields hit a three-and-a-half-week low at 2.097 percent.

The U.S. government slashed its GDP estimate, reporting the economy shrank at a 0.7 percent annual rate in the first quarter, instead of the 0.2 percent growth it initially estimated in April. The economy appears poised for its worst first-half performance since 2011.

Consumer sentiment fell this month, a survey by the University of Michigan showed, while the Institute for Supply Management-Chicago Business Barometer unexpectedly fell in May.

The data supported the notion that the Federal Reserve may consider the U.S. economy too fragile for a hike any time soon in interest rates; it has been nearly a decade since the Fed last raised rates. Higher rates would crimp bond prices, which move inversely to their yields.   Continued...

A money changer counts U.S. dollar bills at a currency exchange office in central Istanbul April 15, 2015. REUTERS/Murad Sezer