Stocks slump worldwide, bonds rally on growth concerns

Tue Oct 7, 2014 4:54pm EDT
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By Yasmeen Abutaleb

NEW YORK (Reuters) - Global equity markets fell sharply on Tuesday and oil slipped to near 27-month lows as investors shifted funds into safe-haven government debt after more poor economic data from Europe heightened concerns about worldwide demand.

Wall Street's primary benchmark, the S&P 500 .SPX, fell 1.5 percent to close at its lowest level in nearly two months. The small-cap Russell 2000 .TOY ended near a one-year low as investors reined in riskier bets ahead of this week's start of third-quarter earnings reports.

The primary catalyst for the equity market weakness was more bad news out of Germany, the euro zone's largest economy. After news on Monday of the biggest monthly drop in German industrial orders since the global financial crisis in 2009, data showed the country's industrial output plunged 4 percent in August in the biggest fall in more than five years.

U.S. markets fell throughout the session, ending near the day's lows. The 10-year U.S. Treasury note US10YT=RR rallied, dropping its yield to 2.34 percent, the lowest since late August

"We're the best of the worst, and that's really helping the U.S.," said Aaron Kohli, an interest rate strategist at BNP Paribas in New York, referring to demand for safe-haven U.S. government debt.

The 30-year Treasury bond US30YT=RR added more than a full point in price to hit its lowest yield since May 2013 and the yield on Germany's benchmark 10-year bond fell to 0.903 percent.

"The (German) number was very weak, which makes for a tough backdrop. I don't think this is a trend of something that will get horrible, but it is weak and current valuations demand that data be better than weak," said Hayes Miller, who oversees about $57 billion as Boston-based head of asset allocation in North America at Baring Asset Management.

MSCI's all-country world index .MIWD00000PUS of equity performance in 45 countries fell 0.97 percent, while the pan-European FTSEurofirst 300 .FTEU3 index ended down 1.5 percent.   Continued...

Traders work on the floor of the New York Stock Exchange October 3, 2014. REUTERS/Brendan McDermid