(Recasts; adds U.S. markets' early action , changes byline;
previous LONDON)
By Herbert Lash
NEW YORK, April 4 (Reuters) - U.S. and European stocks fell
and government debt prices climbed on Friday after the biggest
monthly decline in U.S. payrolls in five years confirmed to
many that the struggling U.S. economy may be in recession.
The dollar fell against the yen and oil rose, triggered by
the dollar's fall. Gold futures in New York recouped early
losses and turned higher.
U.S. employers cut payrolls for the third month in a row in
March, slashing 80,000 jobs, or about 25 percent more than
economists had expected.
"The recessionary winds are hitting the economy with even
greater force with the loss of jobs for a third month," said
Chris Rupkey, senior financial economist at Bank of
Tokyo-Mitsubishi UFJ in New York.
The data reinforced the likelihood that policy-makers at
the Federal Reserve will cut interest rates when they meet
later this month.
Prospects now call "for the Fed to cut the funds rate by a
half percentage point instead of a quarter percentage point,"
said William Sullivan, chief economist at JVB Financial Group
in Boca Raton, Florida.
Benchmark indexes on Wall Street fell. The Dow Jones
industrial average <> was down 79.14 points, or 0.63
percent, at 12,546.89. The Standard & Poor's 500 Index <.SPX>
slipped 3.91 points, or 0.29 percent, at 1,365.40. The Nasdaq
Composite Index <> declined 6.88 points, or 0.29 percent,
at 2,356.42.
European stocks, which had risen earlier, followed U.S.
shares lower after the weak U.S. jobs data.
"This will put the focus back on the economic reality and
get us back to a more gloomy point of view. We've seen a
fantastic rally this week, led by banks and retailers," said IG
Index analyst David Jones.
The FTSEurofirst 300 <> index of top European shares
was off 0.2 percent at 1,308.92.
The earlier rise in European stocks was driven largely by a
recovery in banking shares after Switzerland's UBS reported a
massive write-down and attempted to scrub its books clean of
assets linked to the U.S. subprime credit crisis.
UBS was the top weighted gainer, rising by more than 4
percent.
Earlier, Japan's Nikkei stock average <> slid 0.7
percent, although it ended the week up 3.7 percent, its third
successive week of positive finishes.
The dollar had recovered from an initial sell-off against
the yen in the wake of the jobs data, but then fell again. The
greenback last traded at 101.92 yen <JPY=>, down 0.4 percent.
The euro <EUR=> was up 0.25 percent at $1.5727, while
against the Japanese yen, the dollar <JPY=> was down 0.42
percent at 101.81.
U.S. Treasury debt prices were higher. The benchmark
10-year U.S. Treasury note <US10YT=RR> rose 24/32 to yield
3.5015 percent. The 2-year U.S. Treasury note <US2YT=RR> gained
3/32 to yield 1.8589 percent. The 30-year U.S. Treasury bond
<US30YT=RR> added 37/32 to yield 4.3195 percent.
U.S. light sweet crude oil <CLc1> rose $1.55, or 1.49
percent, to $105.38 per barrel, while spot gold prices <XAU=>
rose $1.90, or 0.21 percent, to $905.40.
(Reporting by Herbert Lash; Editing by Kenneth Barry)
