Hungarian deficit and US jobs report rock markets

It is looking very much like contagion as Hungary joins the list of global debt concerns. From Reuters on Friday:

Dire warnings by Hungary's new government have reignited market concern about the fiscal health of countries in eastern Europe, but many analysts believe the region's sound economic fundamentals will prevent a Greek-style debt crisis.

With investor nerves already frayed over the state of public finances in the euro zone, remarks by the Hungarian prime minister's spokesman supporting the view that the country had only a slim chance of avoiding a debt crisis similar to that of Greece triggered a regional sell-off on Friday.

Edward Harrison at Credit Writedowns reports that Hungary has taken over the number ten spot of potential sovereign defaulters.

To add to investor concerns, US non-farm payrolls came in below expectations. From Bloomberg:

American companies hired fewer workers in May than forecast and workers dropped out of the labor force, indicating government support is still needed to spur economic growth.

Private payrolls rose by 41,000, Labor Department figures showed today, trailing the 180,000 gain forecast by economists. Including government workers, employment rose by 431,000, boosted by a jump in hiring of temporary census workers. The jobless rate fell to 9.7 percent from 9.9 percent.

Consequently, markets took big hits on Friday. Bloomberg reports:

Stocks plunged, sending benchmark U.S. indexes to four-month lows, commodities slid and Treasuries rallied as lower-than-forecast American job growth and a widening government debt crisis fueled concern the global economic recovery will slow. Hungary’s currency, equities and bonds plummeted.

The Standard & Poor’s 500 Index tumbled 3.4 percent to 1,064.88 at 4 p.m. in New York, with only three stocks in the gauge rising. The Dow Jones Industrial Average sank below 10,000 and both measures closed at the lowest levels since Feb. 8. Oil fell 4.2 percent to $71.51 a barrel, while tin sank 9.5 percent to lead declines in metals. Ten-year Treasury yields decreased 17 basis points to 3.2 percent. The euro slid below $1.20 for the first time since March 2006 and the yen climbed against all 16 major counterparts. The forint tumbled to an almost 15-month low against the dollar on concern Hungary may default.