*U.S. mid-Atlantic factory, producer price data disappoint
*Strong JPMorgan results overshadowed by double-dip fears
*Dollar down broadly on economic data; Treasuries gain
(Recasts lead; updates with European markets close)
By Jennifer Ablan
NEW YORK, July 15 (Reuters) - World stocks dropped on
Thursday and the dollar declined broadly after downbeat U.S.
manufacturing and inflation data deepened worries that a
double-dip recession could be at hand.
The rate of growth in the factory sector slowed sharply in
July and U.S. wholesale prices fell for a third straight month,
adding to evidence that the U.S. economic recovery is losing
steam.
The decline in U.S. producer prices appeared to raise the
prospect of a deflationary spiral of lower prices, wages and
business activity.
Financial markets all week have battled conflicting signals
from data showing a slowdown in the U.S. economy's recovery on
the one hand and strong corporate earnings on the other hand.
U.S. Treasuries prices rose as the data raised the
possibility that the Federal Reserve could turn to a second
round of extraordinary measures to stimulate the economy.
"Death, destruction, story at six. Come on, what more do we
need to know here? Double-dip is here, there is no doubt about
it," said Joe Saluzzi, co-manager of trading at Themis Trading
in Chatham, New Jersey.
The Philadelphia Federal Reserve Bank reported that factory
activity growth in the U.S. Mid-Atlantic region fell, with its
business activity index dropping to 5.1 in July from 8.0 in
June.
The New York Federal Reserve Bank said manufacturing in new
York State hit the lowest level since December 2009, while U.S.
producer prices fell 0.5 percent last month.
The negative data overshadowed an unexpectedly large drop
in first-time claims for jobless benefits last week, with
claiming falling 29,000 to a two-year low of 429,000 as
seasonal layoffs at factories eased. For details, see
[] and []
Major equity indexes were down on the largely negative
economic figures. The Dow Jones industrial average <> was
down 102.02 points, or 0.98 percent, at 10,264.70. The Standard
& Poor's 500 Index <.SPX> was down 11.24 points, or 1.03
percent, at 1,083.93. The Nasdaq Composite Index <> was
down 20.92 points, or 0.93 percent, at 2,228.92.
Dow component JPMorgan Chase fell 1.5 percent to $39.75,
even as second-quarter profit topped estimates and its loan
loss reserves dropped by $1.5 billion. Much of the gains came
in areas that will not be a stable future source of income.
[]
Bank stocks fell as investors fretted about JPMorgan's
sober assessment of the economy, boding poorly for Citigroup
Inc <C.N> and Bank of America Corp <BAC.N> which report
earnings on Friday.
Citi shares were off 3.1 percent at $4.08 and Bank of
America fell 3.6 percent to $15.11.
last week "JPMorgan's numbers were good, but they did it by
cutting expenses, not through top-line revenue growth," said
John Brady, senior vice president at MF Global in Chicago. "In
the longer term, that's troubling."
MSCI world equity index <.MIWD00000PUS> moved in sympathy
with the U.S. market's open, dropping 0.66 percent. The Thomson
Reuters global stock index <.TRXFLDGLPU> was also down 0.70
percent.
European shares moved in sympathy with U.S. markets. The
pan-European FTSEurofirst 300 <> index of top shares
closed 1.1 percent lower at 1,033.562 points, the biggest
one-day percentage fall since July 1.
In currencies, the dollar was down against a basket of
major trading-partner currencies, with the U.S. Dollar Index
<.DXY> down 0.88 percent at 82.689 from a previous session
close of 83.426.
The euro <EUR=> soared to a two-month high above $1.29.
It was up 1.04 percent at $1.2872 from a previous session
close of $1.2740. Debt trouble in the euro zone had pushed it
below $1.19 last month, but fairly smooth bond auctions in
Greece, Portugal and Spain have since eased concern.
The data "is going to give traders further reason to dump
the dollar as the risk shifts from Europe to the United
States," said Kathy Lien, director of FX research at GFT Forex
in New York.
Against the Japanese yen, the dollar <JPY=> was down 1.18
percent at 87.40 from a previous session close of 88.440.
CHINA STOCKS FALL AFTER DEBUT
China's key stock index ended 1.9 percent lower, its
biggest fall in two weeks, as Agricultural Bank of China
disappointed with a lackluster Shanghai debut. AgBank, the most
active stock, ended up 0.8 percent at 2.7 yuan compared with
its IPO price of 2.68 yuan.
Earlier data showed China's economic growth moderated to
10.3 percent in the second quarter from 11.9 percent in the
first quarter, slightly below forecasts of 10.5 percent
growth.
All told, Treasuries were one of the biggest beneficiaries
on Thursday. The benchmark 10-year U.S. Treasury note
<US10YT=RR> was up 20/32, with the yield at 2.98 percent. The
2-year U.S. Treasury note <US2YT=RR> was up 1/32, with the
yield at 0.59 percent. The 30-year U.S. Treasury bond
<US30YT=RR> was up 39/32, with the yield at 3.97 percent.
U.S. light sweet crude oil <CLc1> fell $1.36, or 1.77
percent, to $75.68 per barrel, and spot gold prices <XAU=> rose
slightly by 90 cents, or 0.07 percent, to $1,208.40. But the
Reuters/Jefferies CRB Index <.CRB> was up 0.54 point, or 0.21
percent, at 262.74.
(Additional reporting by Ryan Vlastelica, Steven C. Johnson
and Chuck Mikolajczak in New York and Natsuko Waki in London;
Editing by Leslie Adler)
