GLOBAL MARKETS-Shares, euro hit by weak economic data, Italian elections

Thu Feb 21, 2013 7:25pm GMT

* Euro zone PMI deals blow to economic recovery hopes
    * Italian elections cast doubt on reform program
    * US economic data suggest Fed easing still needed
    * Euro hits 6-week low vs dollar, 3-week low vs yen
    * Brent crude hits three-week low


    By Angela Moon
    NEW YORK, Feb 21 (Reuters) - Major stock markets fell for a
second day and the euro slid to a six-week low against the U.S.
dollar on Thursday after data that showed weak economic growth
in both Europe and the United States.
    Oil prices also slumped, with Brent crude falling to a
three-week low, after a survey of euro zone business conditions
dealt a blow to hopes the region might soon emerge from
recession. 
    In the United States, a raft of economic data from claims
for jobless aid to factory activity and consumer price inflation
also pointed to a slow economic growth and supported the
argument for the Federal Reserve to maintain its monetary 
stimulus. 
    The Fed is currently buying $85 billion in bonds per month
and has said it would keep up the purchases until the labor
market outlook improves substantially, although officials are
increasingly divided over the wisdom of that course. 
    "The economy is in a holding pattern. It's not going to
strengthen sufficiently to justify an end of the current
program," said Millan Mulraine, senior economist at TD
Securities in New York.  
    On Wednesday, minutes from the U.S. Federal Reserve's most
recent meeting had suggested the central bank may slow or stop
buying bonds sooner than expected, resutling in U.S. stocks 
suffering their biggest one-day decline since Nov. 14. 
 
    
    By midsession in New York on Thursday, the MSCI world equity
index was down 1.4 percent, its biggest daily
loss so far this year.  
    The Dow Jones industrial average was down 72.07
points, or 0.52 percent, at 13,855.47. The Standard & Poor's 500
Index  was down 10.82 points, or 0.72 percent, at
1,501.13. The Nasdaq Composite Index  was down 36.56
points, or 1.16 percent, at 3,127.85.
    In Europe, shares closed sharply lower, after weak economic
data and ahead of this weekend's Italian elections which may
call into question the country's economic reform program.
    Europe's Eurofirst 300 index shed 1.5 percent to
close at 1,151.61. The blue chip Euro STOXX 50 index 
index fell 2.3 percent to 2,580,20, a new low for 2013.
    Earlier Japan's Nikkei share average fell back from a
52-month high with investors' risk appetite dampened by declines
in U.S. shares. 
 
    EURO SLIDES AGAINST DOLLAR AND YEN 
    The euro dropped to a six-week low against the U.S. dollar
and a three-week trough against the yen on Thursday in the wake
of the data showing a struggling euro zone economy and amid
uncertainty ahead of Italy's election at the weekend. 
    The euro dropped to $1.3166, its lowest since Jan.
10, and well below a 15-month peak of $1.3711 reached on Feb. 1.
The euro last traded at $1.3209, down 0.5 percent.
    The euro zone purchasing managers' (PMI) data for February
pointed to continued weakness in the region, keeping alive
chances of an interest rate cut by the European Central Bank in
coming months. 
   "The PMI news is not good and shows the euro zone is under
economic duress and you add to the current uncertainty ahead of
the Italian elections and we have a euro that is struggling to
get ahead," said Matthew Lifson, senior trader and analyst at
Cambridge Mercantile Group in Princeton, New Jersey. 
   Prospects of a fragmented parliament after Italy's national
election could trigger a sell-off in the peripheral bond market
and weigh on the euro. 
   Prices on 30-year U.S. Treasury bonds rose more than one
point on Thursday as renewed economic worries intensified
selling in stocks and risky assets and purchases of safehaven
bonds.
    The 30-year U.S. government bond last traded
31/32 higher at 99-17/32, yielding 3.149 percent, down 5.2 basis
points from late on Wednesday. It was up as much as 1-1/32 in
price with a yield of 3.146 percent.
    In other risky assets, Brent April crude was down
$1.75 at $113.85 a barrel, after slipping to $113.32 during the
session, Brent's lowest price since Jan. 29.
    U.S. April crude was down $2.22 at $93 a barrel,
after falling to $92.63, the lowest front-month price since Jan.
7, having dropped below the 50-day moving average of $93.32.
    The day's decline for both Brent and U.S. crude came after
Brent's largest one-day fall in 2013 on Wednesday, as metals and
equities also retreated after recent rallies.
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