GLOBAL MARKETS-Investors rush to bonds on economy fears
* Weak U.S. jobs data adds to growing signs of global slowdown
* Yields on U.S., German benchmark bonds plumb fresh record lows
* Euro hits 23-month low versus dollar, global stock indexes slump
* Oil falls below $98 a barrel on global growth concerns (Updates prices, adds comment)
By Herbert Lash
NEW YORK, June 1 (Reuters) - Yields on U.S. Treasury debt fell to record lows o n F riday and stock markets plunged after a weak U.S. jobs report aggravated fears of slower global growth and sent investors scurrying for safety.
The data, which showed U.S. job growth in May was the weakest in a year, underscored a growing sense that the U.S. economy is not immune to weakness in Europe, where Spain is struggling to support its banks, or slower growth in China.
Major U.S. and European indexes fell more than 1.5 percent. Crude oil fell to a 16-month low beneath $98 per barrel as poor Chinese manufacturing data and dismal European reports on factory activity raised growth fears.
"From China to Europe to the U.S., all the data have shown real slowing," said John Kilduff, a partner at New York-based investment manager Again Capital.
The weak data has fueled speculation of another round of emergency rescue measures from central banks, which have tried to boost growth in recent years by slashing interest rates to zero and providing cheap loans to banks.
"The hope for U.S. investors had been that the U.S. economy at least could continue its growth even as Europe was declining," said Rick Meckler, president of hedge fund LibertyView Capital Management LLC in Jersey City, New Jersey.
"The time has probably come for some new government action in the U.S., Europe and China."
Talk that the Federal Reserver could launch another round of bond purchases pushed the dollar lower against the euro, though Europe's debt crisis limited the single currency's gains. It last traded at $1.2413 after dipping below $1.23.
Government bonds and gold soared as investors sought a safe place to park their money.
German Bund futures hit a record high of 146.89, up 86 ticks on the day, and yields on German 10-year bonds fell as low as 1.127 percent.
Benchmark 10-year Treasury notes rose as much as 1-4/32 in price to yield 1.442 percent, the lowest on records that date to the early 1800s, according to Reuters data.
Yields on British gilts also hit record lows.
Some questioned the wisdom of buying bonds that on an inflation-adjusted basis are already providing negative returns. The coupon on German and U.S. 10-year government debt is 1.75 percent - below the rate of inflation.
"It's starting to get a little ridiculous. The bond market is just insane, insane. People have lost their mind," said Stephen Massocca, managing director at Wedbush Morgan in San Francisco.
Even so, appetite for riskier assets was in short supply.
MSCI's all-country world equity index fell 1.6 percent, while the FTSEurofirst 300 index index of top European shares fell more than 2 percent, wiping out this year's gains.
The Dow Jones industrial average was down 218.54 points, or 1.76 percent, at 12,174.91. The Standard & Poor's 500 Index was down 25.68 points, or 1.96 percent, at 1,284.65. The Nasdaq Composite Index was down 58.76 points, or 2.08 percent, at 2,768.58.
Copper sank to its lowest level this year on global growth concerns, and market measures of investor anxiety spiked. The CBOE Volatility index jumped more than 5 percent and the Euro STOXX 50 volatility index rose 3.1 percent, paring earlier gains of more than 7 percent.
"I highly doubt the selling will abate today, especially with all the European turmoil going on" said Tom Donino, co-head of trading at First New York Securities.
Gold prices reversed early losses to rally 3 percent on speculation U.S. authorities could unveil another round of monetary easing to boost growth. Spot gold hit a high of $1,613.70 an ounce.
Brent crude oil futures tumbled to their lowest since February 2011 to an intra-day low of $97.70, before recovering to around $98.77, off 3 percent for the session.
U.S. crude oil slipped to $83.66 per barrel, down 2.9 percent.
The Thomson Reuters-Jefferies CRB index, a global benchmark for commodities, fell 1.4 percent after tumbling nearly 11 percent in May, the second-largest monthly decline since the darkest days of 2008.
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