NEW YORK, Aug 6, (Agencies): World stock markets and the dollar slumped on Friday as investors fled to safe-haven bonds and gold after US employment data signaled the economic recovery was losing traction. The US economy lost 131,000 jobs in July as more temporary US census jobs ended, and private employers added fewer workers to their payrolls than expected in July. US employment has become a major focus for investors as the economy shows signs of weakness while US and European companies report strong profits. “Initial market reactions signal concerns about the impact of the poor employment picture on spending, corporate revenues and sustainable profitability,” said Mohamed El-Erian, co-chief investment officer at Pacific Investment Management Co in Newport Beach, California.

“The US Treasury market has been pricing in the muted growth outlook ... and the equity markets are now catching up,” El-Erian added. World stocks as measured by MSCI dropped 0.6 percent. The Thomson Reuters global stock index fell 0.7 percent. Safe-haven bellwethers gained, with gold rising and yields on US and German benchmark bonds declining. US benchmark 10-year Treasury debt yields fell to a 15-month low, while two-year note yields dipped to a record low of 0.50 percent after the payrolls report.
In late morning in New York, the 10-year yield was at 2.83 percent, down from 2.90 percent on Thursday. Gold, rose $12.65, or 1.06 percent, to $1,206.70 an ounce.
The US dollar fell to 85.20 yen, approaching a 15-year low, and fell against the euro at $1.3269 amid economic growth.
The jobs report “increases the odds of the Federal Reserve having to implement fresh stimulus measures to jump-start the recovery,” said Joe Manimbo, an analyst at Travelex Global Business Payments in Washington. “Nothing is in there to argue for a firmer dollar.”
The dollar declined against a basket of major trading-partner currencies, with the US Dollar Index down 0.6 percent at 80.349.
Investors are concerned the US economy is slipping back from recovery and threatening to take the rest of the world with it. In recent weeks, however, investor sentiment has been boosted by a series of generally positive earnings reports, particularly from the financial sector.

US
US Stocks and interest rates dropped Friday after a disappointing employment report renewed concerns about a slowdown in economic growth. The Dow Jones industrial average fell 120 points in midday trading. Broader indexes also fell more than 1 percent. The Labor Department said 131,000 jobs were cut last month, though that was primarily tied to layoffs of temporary census workers. The unemployment rate remained unchanged at 9.5 percent. Economists polled by Thomson Reuters had forecast 65,000 jobs would be cut last month and the unemployment rate would rise to 9.6 percent.
Because of the cuts to census workers, investors were largely focused on private sector jobs, which account for most jobs in the country. Private employers added just 71,000 jobs, well short of the 90,000 expected by economists. The Labor Department also sharply revised lower the number of jobs private employers added in June. The department now says just 31,000 private sector jobs were added in June, compared with a previous estimate of 83,000.

“The Labor Department numbers the last two, three months show the economy has hit a soft spot,” said Michael Strauss, chief economist and market strategist at Commonfund.
Persistently high unemployment is the most significant drag on the US economy, and has been a key focus for investors. Even people who are employed have been slowing down their spending, which hurts the economy even more. Economists say that about 200,000 new private sector jobs would need to be added each month to drive the unemployment rate lower.
Retailers were hurt following the report as investors expected shoppers to continue to hold on to their money. J.C. Penney Co, Macy’s Inc. and Target Corp were among those that fell.
Economic data over the past three months has indicated a slowdown in growth, and investors are unsure just how much more the recovery will weaken. The disappointing jobs data magnifies worries that slowing growth could end up leading the country back into recession during the second half of the year.
The latest weak sign on the labor market brings heightened attention to the Federal Reserve’s meeting next week. The Fed let several economic stimulus programs expire earlier this year such as purchasing mortgage-backed securities, and investors are now wondering whether the central bank will consider new steps to encourage lending again.
In midday trading, the Dow Jones industrial average fell 120.79, or 1.1 percent, to 10,554.19. The Standard & Poor’s 500 index fell 14.00, or 1.2 percent, to 1,111.81, while the Nasdaq composite index fell 25.46, or 1.1 percent, to 2,267.60.
About five stocks fell for every two that rose on the New York Stock Exchange, where volume came to a very light 360.2 million shares.

Europe
European stocks hit a three-month high on Thursday in a broad rally ahead of the European Central Bank’s comments on the economy, but the gains were limited by a bit of disappointment on the earnings front.
Unilever tumbled 4.9 percent after its results missed forecasts and the food major warned of rising pressures from rivals and higher commodity costs.
And British bank Barclays sank 3.5 percent — shedding some of the gains made in the recent weeks — after posting results that failed to impress investors.
At 1151 GMT the FTSEurofirst 300 index of top European shares was up 0.5 percent at 1,075.97 points, while the Euro STOXX 50, the euro zone’s blue chip index, was up 0.6 percent at 2,842.26 points.
The two benchmark indexes have gained about 12 percent and 14 percent respectively since hitting a low in early July.
Investors’ appetite for risky assets such as stocks has improved in the wake of reassuring stress tests on the banking sector, news that a planned reform of the sector would be scaled down, and solid corporate results across the board.
“Stocks have been range-bound but now we’re flirting with the upper end of the range thanks to the strong earnings over the past weeks,” said David Thebault, head of quantitative sales trading, at Global Equities in Paris.

UK
Britain’s top shares fell on Friday, led by banks and miners, after weak jobs data cast doubt over the sustainability of the economic recovery in the United States and sapped earlier momentum.
The FTSE 100 index closed down 33.39 points, or 0.6 percent, at 5,332.39, falling from a session high of 5,408.06.
The index again failed to finish above the psychologically important 5,400 level, which it has not managed since May 13.
US employment fell for a second straight month in July as more temporary census jobs ended while private hiring rose less than expected, pointing to an anaemic economic recovery.
In addition, the US government revised payrolls for May and June to show 97,000 fewer jobs than previously reported.
“Worries over the risk to the US recovery have replaced European sovereign debt fears for the time being, and the uncertainty is weighing on equities,” said Jimmy Yates, head of equities at CMC Markets.
“All eyes will now be on the US Federal Reserve to see what measures, if any, it may take to maintain the economic recovery.”
In London, banks, which led on the upside for much of the day after Royal Bank of Scotland’s bullish results, were the sharpest fallers.

Asia
Asian stock markets were mixed Friday as investors looked to monthly employment figures for clues about the strength of the US economic recovery.
The mood in the region was cautious after new unemployment benefit claims in the US rose to their highest level in four months. Investors are now awaiting the broader US jobs report due later Friday that will give a key reading on the health of the world’s biggest economy.
Analysts expect the Labor Department to say private employers hired 90,000 workers in July, a slight increase from the 83,000 hired in June. But the unemployment rate will likely rise to 9.6 percent from 9.5 percent because of government layoffs tied to cutting temporary census jobs.
Japan’s benchmark Nikkei 225 stock index lost 0.4 percent to 9,615.91 while Hong Kong’s Hang Seng was up 0.6 percent to 21,671.55.
South Korea’s Kospi declined 0.1 percent to 1,782.34 and Australia’s S&P/ASX 200 shed 0.2 percent. Markets in India, Thailand and Indonesia gained while Malaysia and Singapore dropped.
The Shanghai Composite Index rose 0.1 percent to 2,624.45 as investors mulled how much a slowdown in government spending and tighter monetary policy could cool China’s economic growth.

Oil
Oil prices fell below $81 a barrel Friday after a government jobs report prompted new concerns about US economic growth.
The Labor Department said 131,000 jobs were cut in July, though that was primarily tied to layoffs of temporary census workers. Economists polled by Thomson Reuters had forecast 65,000 jobs would be cut last month.
Benchmark crude for September delivery fell $1.82 to $80.19 a barrel in early afternoon trading on the New York Mercantile Exchange.
The Dow Jones industrial average fell more than 130 points in afternoon trading. Broader indexes also fell more than 1 percent.
“Oil prices may be subject to push-pull in investment sentiment — support from some as a hedge against inflation and pressure from remaining concerns over the prospects of slow economic growth,” said an energy report from Sucden Financial in London.
In other Nymex trading in September contracts, heating oil fell 2.76 cents to $2.1592 a gallon, gasoline lost 3.29 cents to $2.1315 a gallon and natural gas dropped 3.7 cents to $4.561 per 1,000 cubic feet.
In London, Brent crude was down $1.07 to $80.74 a barrel on the ICE Futures exchange.

Currencies
The dollar was sharply lower Friday after a weak US jobs report stoked fears the US economic recovery is stalling, dealers said, with the euro benefitting after recent positive eurozone data.
They said the dollar was hit badly after the US economy shed 131,000 jobs in July, compared with market forecasts for 87,000.
Worse still, the government revised the June job loss figures to 221,000 rather than the 125,000 previously reported, and while the private sector generated 71,000 jobs in July, forecasts were for more than 80,000.
The dollar had been slightly firmer earlier in the day but stood little chance when the labour market report came through.
In late London trade, the euro was at $1.3283, up sharply from $1.3190 in New York late Thursday but off three-month highs of $1.3334 seen on the US data release.
Against the Japanese currency, the dollar tumbled to 85.25 yen, managing to come off a low of 85.02 yen, after 85.82 yen on Thursday.
In late trade, the euro changed hands at 1.3283 dollars against 1.3190 dollars on Thursday, at 113.25 yen (113.22), £0.8312 (0.8298) and 1.3768 Swiss francs (1.3795).
The dollar stood at 85.25 yen (85.82) and 1.0365 Swiss francs (1.0453).
The pound was at $1.5980 (1.5893).

Gold
On the London Bullion Market, the price of gold climbed to $1,207.75 an ounce from $1,192.50 an ounce on Thursday.