U.S. Markets close in 18 mins

Global Markets: Stocks sink on dismal euro zone data, dollar gains

By Herbert Lash
Traders work on the floor at the NYSE in New York

By Herbert Lash

NEW YORK (Reuters) - The dollar edged higher while global shares slid on Monday as euro zone equities clocked their worst day in a month after dismal business activity readings in Europe deepened fears of a looming recession there.

Bond yields across the euro area tumbled after German private sector activity shrank for the first time in 6-1/2 years in September as a manufacturing recession worsened and service-sector growth also lost momentum.

Growth also slowed unexpectedly in France, the only other euro zone country for which IHS Markit's flash composite Purchasing Managers' Index is published.

Germany's DAX stock index <.GDAXI> fell 1% to its biggest one-day fall since Aug. 23. The pan-European STOXX 600 index <.STOXX> lost 0.80%.

Copper prices fell to their lowest in 2-1/2 weeks on weak demand prospects, reinforced after U.S.-China trade talks failed to yield a breakthrough last week.

"Trade tensions between the two largest economies in the world are having an impact ... the dreadful manufacturing figures from Germany this morning is a great example of how the problem spills out beyond the U.S. and China," said CMC Markets analyst David Madden in London.

Marc Chandler, chief market strategist at Bannockburn Global Forex LLC said the euro zone flash PMI dashed hope that the worst was past.

The euro zone economy is not showing convincing signs of a rebound and a persistent downturn in manufacturing puts at risk the rest of the economy, European Central Bank President Mario Draghi said.

MSCI's gauge of stocks across the globe <.MIWD00000PUS> shed 0.22% and its emerging markets index <.MSCIEF> lost 0.60%.

U.S. stocks barely budged, with gains in shares of Apple Inc <AAPL.O> offset by mixed economic data that added to caution over the prolonged U.S.-China trade war. Apple Inc <AAPL.O> rose 0.46% after U.S. trade regulators approved 10 out of 15 requests for tariff exemptions by the iPhone maker. U.S. employment in the services sector shrank in September for the first time in 9-1/2 years, IHS Markit's PMI showed. At 50.9 it was below expectations of 51.3. But data also showed manufacturing activity rose, topping expectations.

The Dow Jones Industrial Average <.DJI> rose 14.92 points, or 0.06%, to 26,949.99. The S&P 500 <.SPX> lost 0.29 points, or 0.01%, to 2,991.78 and the Nasdaq Composite <.IXIC> dropped 5.21 points, or 0.06%, to 8,112.46.

The dollar climbed, buoyant in recent months as its relatively high yield and a strong U.S. economy attracted investors.

The dollar index <.DXY> rose 0.11%, with the euro <EUR=> fell 0.23% to $1.0992. The Japanese yen <JPY=> strengthened 0.12% versus the greenback at 107.46 per dollar.

Bond yields across the euro area tumbled after the weak business activity data. The yield on Germany's benchmark 10-year bond <DE10YT=RR> fell to negative 0.59%, its lowest since the ECB meeting on Sept. 12 concluded with rate cuts and fresh asset purchases to boost weak growth.

U.S. Treasury yields dropped in line with the European bond market. U.S. 30-year, 10-year and 2-year yields all fell to two-week lows.

The benchmark 10-year U.S. Treasury notes <US10YT=RR> rose 10/32 in price to push its yield down to 1.718%. Crude oil futures stabilized after nearly a 7% gain last week. Concerns about global supplies following the Sept. 14 attack on Saudi oil facilities offset prospects for quick restoration of the kingdom's output and worries about a weak European economy.

Global benchmark Brent futures <LCOc1> settled up 49 cents to $64.77 a barrel while U.S. West Texas Intermediate (WTI) crude <CLc1> rose 55 cents to settle at $58.64.

Worries about Europe helped lift gold to its highest in more than two weeks. U.S. gold futures <GCcv1> settled up 1.1% at $1,531.50 an ounce.

(Reporting by Herbert Lash; Editing by David Gregorio)