By Herbert Lash
NEW YORK (Reuters) – Global equity markets and bond yields both fell on Friday, as data showed the U.S. economy contracted in the first quarter and as investors were unnerved by mixed signals from Greece’s debt talks.
In Europe, shares also fell on data showing that private loan growth in the euro zone stalled in April, while Wall Street shares reacted to details in the U.S. gross domestic product data indicating that after-tax corporate profits declined 8.7 percent in the first quarter.
Conflicting reports that Athens was close to clinching a reforms-for-cash deal with its creditors pushed German 10-year bond yields down 4 basis points to just under 0.50 percent.
“It’s just Greece, Greece and Greece,” said David Madden, a market analyst at IG in London. “The lack of news in either direction tells you why traders are sitting on their hands.”
U.S. debt yields also dropped, with the 30-year U.S. Treasury yield falling to its lowest level in three and a half weeks, at 2.84 percent, while benchmark U.S. 10-year yields hit a three-and-a-half-week low at 2.097 percent.
The U.S. government slashed its GDP estimate, reporting the economy shrank at a 0.7 percent annual rate in the first quarter, instead of the 0.2 percent growth it initially estimated in April. The economy appears poised for its worst first-half performance since 2011.
Consumer sentiment fell this month, a survey by the University of Michigan showed, while the Institute for Supply Management-Chicago Business Barometer unexpectedly fell in May.
The data supported the notion that the Federal Reserve may consider the U.S. economy too fragile for a hike any time soon in interest rates; it has been nearly a decade since the Fed last raised rates. Higher rates would crimp bond prices, which move inversely to their yields.
“The market simply doesn’t believe the data will be strong enough to let the Fed (boost rates) this year,” said Aaron Kohli, interest rate strategist at BNP Paribas in New York.
MSCI’s all-country world index <.MIWD00000PUS> of the stock performance in 46 countries fell 0.61 percent. The pan-European FTSEurofirst 300 <.FTEU3> closed down 1.79 percent at 1,586.30 points.
Wall Street also finished lower.
The Dow Jones industrial average <.DJI> fell 115.44 points, or 0.64 percent, to 18,010.68. The S&P 500 <.SPX> slid 13.4 points, or 0.63 percent, to 2,107.39, and the Nasdaq Composite <.IXIC> lost 27.95 points, or 0.55 percent, to 5,070.03.
U.S. 10-year notes pared most gains late in the session to end near break-even, yielding 2.1284 percent.
Oil surged almost 5 percent as a rally in the dollar faded and after data a day earlier showed four straight weekly draws in U.S. stockpiles.
North Sea Brent <LCOc1> settled $2.98 higher at $65.56 a barrel, and U.S. crude <CLc1> rose $2.62 to settle at $60.30 a barrel.
The dollar index <.DXY> was down 0.06 percent at 96.902 and remained on track for a rise in May, resuming a string of nearly uninterrupted monthly gains that began last July.
The dollar was off 0.33 percent against the euro, at $1.0982. Against the yen, it rose 0.13 percent to 124.10 yen.
(Editing by Bernadette Baum and Leslie Adler)