Stocks fall, oil surges; economic data show weakness

What an end to the week for markets. From Bloomberg:

The Dow Jones Industrial Average fell the most in 15 months, the dollar slid to a one-week low and Treasuries rallied after unemployment and fuel prices surged, heightening speculation the U.S. faces a protracted recession.

U.S. equities declined, led by a 395-point drop in the Dow, as crude jumped more than $10 a barrel. The Standard & Poor's 500 Index decreased 3.1, the steepest sell-off in three months, and Europe's Dow Jones Stoxx 600 slid 2 percent to the lowest since April 15.

The dollar lost 0.9 percent against a basket of six currencies including the euro, against which it weakened 1.1 percent to $1.5775, as investors pared bets the U.S. Federal Reserve will raise interest rates this year. Yields on 10-year U.S. Treasury securities and European government bonds declined as the price of fixed-rate investments climbed.

The fall in US employment in May was actually less than expected, but a jump in the unemployment rate unnerved investors. From Bloomberg yesterday:

Payrolls fell by 49,000 after a 28,000 drop in April, the Labor Department said today in Washington. The jobless rate increased by half a point to 5.5 percent, higher than every forecast in a Bloomberg News survey, partly because an influx of teenagers into the workforce exceeded jobs available...

Revisions subtracted 15,000 from payroll figures previously reported for March and April.

Economists had projected payrolls would drop by 60,000 after a previously reported 20,000 decline the prior month, according to the median of 79 forecasts in a Bloomberg News survey. The jobless rate was forecast to rise to 5.1 percent.

The US employment report wasn't taken well by European stock investors either, the Dow Jones Stoxx 600 Index falling 2 percent yesterday to 310.29, the lowest since April 15. But the European economy faces its own problems, as Bloomberg reported yesterday.

Industrial production in Germany, Europe's largest economy, unexpectedly declined in April, the second report in as many days to suggest Europe's largest economy is cooling.

Output, adjusted for seasonal swings and inflation, fell 0.8 percent from March, the Economy Ministry in Berlin said today. Economists expected a 0.2 percent gain according to the median of 43 forecasts in a Bloomberg News survey...

Manufacturing orders in Germany unexpectedly fell for the fifth month in succession, figures showed yesterday, the longest streak since 1992, as demand from the euro area slumped.