Oil prices plummeted more than 10% on Thursday, dragging down stocks and fueling demand for safe-haven assets, after new data cast fresh doubts on the strength of the global economic recovery.
US crude oil ended below USD 100 a barrel and extended losses after settlement, as reports showed new weekly US jobless claims jumped to an eight-month high and the country's productivity growth slowed in the first quarter.
It was the second-largest single day loss on record for US crude oil, considering the post-settlement trade. For Brent crude, it was the largest one day fall on record.
The euro tumbled 2% against the dollar, its worst day against the greenback since August, after the European Central Bank signaled it will refrain from raising interest rates next month.
On Wall Street, the Dow and the S&P 500 fell about 1% as energy shares slumped with the price of oil.
"The longer-term bull cycle (for oil) is still in place, but this correction may have a life span of several months, as weaker economic data is fueling this correction to a large part," said Sterling Smith, senior analyst for Country Hedging Inc in Minnesota.
Some investors also saw the recent disappointing economic data as a bad omen for Friday's key US jobs report.
The Dow Jones industrial average ended down 139.41 points, or 1.10%, at 12,584.17, while the Standard & Poor's 500 Index lost 12.22 points, or 0.91%, to 1,335.10. The Nasdaq Composite Index fell 13.51 points, or 0.48%, at 2,814.72.
Expectations of stable euro zone rates cushioned a fall in European stocks, which closed slightly lower after data showed German industrial orders declined unexpectedly in March.
The FTSEurofirst 300 index of top European shares closed 0.29% lower after falling 1.4% on Wednesday.
The MSCI All-Country World index fell 1.3% while the MSCI stock index for emerging markets lost 1.0%.
Before this week's decline, world stocks had risen more than 8.0% this year on investor confidence in strong corporate earnings and robust growth in emerging markets.
Among the safe-havens benefited by Thursday's data, 10-year U.S. Treasury notes jumped 17/32 in price, while their yield fell to 3.16%. The Japanese yen gained around 0.4% against the US dollar at 80.22 yen.
The euro lost 2.0% against the greenback, to USD 1.4525, after ECB President Jean-Claude Trichet mentioned upside risks on prices but did not use the phrase "strong vigilance" on inflation, which traders said suggests the ECB won't hike rates again in June.
Commodities suffer
Commodities extended their sell-off into a fourth consecutive day as investors worried about faltering economic growth in major economies and excessive monetary tightening in China, the world's top consumer of raw materials.
US crude oil prices settled down 8.64% at USD 99.80 a barrel, before hitting USD 98.25 a barrel in post-settlement trade. Brent crude ended 8.57% lower at USD 110.80 a barrel.
The Reuters-Jefferies CRB index, a global benchmark for commodities prices, dropped 4.9% on Thursday. It has lost about 8% so far this week.
Silver was set for its deepest weekly decline since the late 1980s after the CME Group, in a move to curb speculation, raised margin requirements for the 5,000-ounce COMEX silver futures contract .
Silver has fallen more than 20% this week, with investors taking profits from a recent rally that took it to a 31-year high just shy of USD 50 an ounce. It closed down 10% on Thursday, at USD 35.34 an ounce, its biggest one-day loss since October 2008.
Copper, seen as a proxy for global economic growth, dived more than 3% to its lowest level since December.
"I think what's happening is risk aversion across all the asset classes. Everyone thought the US was on a growth trajectory, but now some talk out of the US is showing pretty
mediocre growth," said Patrick Armstrong of Armstrong Investment Managers in London.
"We have not been adding any commodity exposure in the dips, but we're still positive on commodities. US dollar depreciation in future will provide a positive tail wind," he added.
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