(Recasts with U.S. markets, changes byline; dateline previous
LONDON)
* Global stocks sag on dim outlook, inflation fears
* Oil rises after fall in U.S. crude oil inventories
* Dollar falls on signs of U.S. labor market weakness
By Herbert Lash
NEW YORK, July 2 (Reuters) - Wall Street stocks followed
European shares lower on Wednesday as a retreat in coal prices
hit both regions and a surprising drop in private jobs data for
June pushed the dollar lower.
The euro also drew support ahead of an expected interest
rate hike in Europe.
Oil rose above $142 a barrel after U.S. government data
showed a bigger-than-expected fall in U.S. crude stocks last
week. Tensions over Iran's nuclear development program
continued to support the oil market as well. Gold steadied on
dollar weakness and oil's strength.
U.S. light sweet crude oil <CLc1> rose $1.49 to $142.46.
Spot gold prices <XAU=> rose $2.75 to $941.60.
U.S. stocks slid to session lows at midday as shares of
major technology firms dropped on profit worries and the
rebound in crude prices stirred caution about economic growth.
"The third quarter is going to be a quarter that is singled
out as a period where profit estimates come in line with
realistic expectation," said Peter Kenny, managing director at
Knight Equity Markets in Jersey City, New Jersey.
"You will see profit estimates across the board, not just
for financials, lowered," he said.
General Motors Corp <GM.N> shares fell 6.9 percent to
$10.94 after Merrill Lynch said the automaker will need to
raise about $15 billion in cash to shore up liquidity and
bankruptcy is "not impossible" if sales continue to slump.
Before 1 p.m., The Dow Jones industrial average <> fell
40.14 points, or 0.35 percent, at 11,342.12. The Standard &
Poor's 500 Index <.SPX> fell 4.79 points, or 0.37 percent, at
1,280.12. The Nasdaq Composite Index <> fell 26.21 points,
or 1.14 percent, at 2,278.76.
European stocks ended at intraday lows. Coal prices dropped
more than 9 percent in London, which weighed heavily on mining
stocks. A solid recovery amid banks placed a cap on losses.
The FTSEurofirst 300 index <> of top European shares
closed 0.65 percent lower at 1,167.92 points, after clocking up
gains of 1.2 percent earlier in the session.
The benchmark has now fallen on eight of the last 11 days.
"People continue to be nervous," said Thierry Lacraz,
investment adviser at Pictet & Cie in Geneva. Lacraz pointed to
the market volatility, fears of further losses or capital
increases across industry sectors and soaring oil prices.
Miners and steelmakers fell sharply with the DJStoxx
European basic resources <.SXPP> index shedding 5.2 percent. An
8 percent decline at Antofagasta <ANTO.L>, and declines of 4.4
percent each at Rio Tinto <RIO.L> and Anglo American <AAL.L>
pushed the index down.
The dollar fell against the euro after a report showed the
U.S. private sector shed more jobs than expected in June, as
investors bought the euro ahead of an expected interest rate
hike by the European Central Bank on Thursday.
The dollar fell against major currencies, with the U.S.
Dollar Index <.DXY> down 0.39 percent at 72.083. Against the
yen, the dollar <JPY=> fell 0.05 percent at 106.02.
The euro <EUR=> rose 0.50 percent at $1.5867.
Higher benchmark rates in Europe will boost the return of
euro-denominated assets and weigh on the U.S. currency.
U.S. government debt prices rose on the surprisingly steep
drop in the ADP National Employment Report, exacerbating fears
about consumer spending in a flagging U.S. economy.
ADP reported U.S. payrolls shed 79,000 jobs, almost four
times a forecast decline of 20,000.
The benchmark 10-year U.S. Treasury note <US10YT=RR> rose
10/32 to yield 3.97 percent. The 30-year U.S. Treasury bond
<US30YT=RR> rose 18/32 to yield 4.52 percent.
"It was a splash of cold water in our face to see the
reports of joblessness in June shooting up like that,
suggesting we are just not out of the woods by any means in
terms of skirting recession," said David Dietze, chief
investment strategist at Point View Financial Services in
Summit, New Jersey.
Japan's Nikkei average <> fell 1.3 percent, extending
its longest losing streak since 1965 to a 10th day, on fears
that high energy prices will curb export demand.
Tokyo Stock Exchange President Atsushi Saito told Reuters
the market's situation is "terrifying," adding "the market will
likely be lost for a while."
Shares in the Asia-Pacific region outside Japan were down
0.6 percent, according to an MSCI index <.MSCIAPJ> and were
within striking distance of mid-March lows.
(Reporting by Ellis Mnyandu, Walker Simon, John Parry and
Vivianne Rodrigues in New York and Naomi Tajitsu, Jane Merriman
and Patrizia Kokot in London)
(Reporting by Herbert Lash. Editing by Richard Satran)
