Stocks post worst week of 2015 after China data

By Herbert Lash

NEW YORK (Reuters) - World stock markets tumbled and commodity prices slid further on Friday after new data provided further evidence of slowing economic growth in China, sending investors scurrying to the safety of bonds and gold.

Crude oil prices fell again, posting their longest weekly losing streak in nearly 30 years, and emerging market stocks, bonds and currencies were all lower, with slowing Chinese growth reducing demand for commodities from developing countries.

China's manufacturing sector shrank at its fastest rate in more than six years August, according to a survey from private data vendor Caixin/Markit.

World markets had already been on edge after China's surprise devaluation of the yuan > last week and a more than 30 percent fall in its stock markets since mid-year.

 

The U.S. dollar fell also, dropping to a two-month low against the euro, as the Chinese data and falling commodity prices eroded expectations the Federal Reserve will raise U.S. interest rates next month.

"The Fed is in an extremely awkward situation right now," Robbert van Batenburg, director of flow strategy at Societe Generale. "You have across-the-board competitive currency devaluations that will invoke the deflationary monster here in the U.S."

Stocks on Wall Street and in Europe fell more than 2.0 percent in a global rout spurred by a 4.9 percent decline in Shanghai stocks <.SSEC>. Major European stock indices have now fallen more than 10 percent from their peak.

The pan-regional FTSEurofirst <.FTEU3> fell 3.4 percent to 1,427.13, its worst day since November 2011, as traders shrugged off euro zone manufacturing and services data in a third straight day of selling.

MSCI's emerging markets index <.MSCIEF> was at its weakest in four years, off 2.17 percent, while the firm's all-country world stock index <.MIWD00000PUS> fell 1.99 percent.

The Dow Jones industrial average <.DJI> fell 431.19 points, or 2.54 percent, to 16,559.5. The S&P 500 <.SPX> slid 53.12 points, or 2.61 percent, to 1,982.61 and the Nasdaq Composite <.IXIC> lost 143.24 points, or 2.94 percent, to 4,734.25.

Thomas Lee, managing partner at Fundstrat Global Advisors in New York, said it was hard to say what was behind the sell-off but a bottom may be close at hand.

"There's no shortage of things people can cite, from the movement in currencies, to the weakness in commodities and fears about China," Lee said. "But at the end of the day if people are trying to take down risk, then it's going to make sense for them to sell their exposure in equities as well."

OIL AND EMERGING MARKETS HIT

Crude oil fell again as oversupply from Organization of the Petroleum Exporting Countries countries in particular continues to overwhelm slowing demand. U.S. crude was at a more than 6-year low as it posted an eighth straight weekly decline.

The U.S. benchmark traded briefly below the key psychological level of $40, before settling down 87 cents at $40.45 a barrel. Brent fell $1.16 to settle at $45.46 a barrel.

Oil's run of weekly losses is its worst since 1986.

Emerging market currencies in the Americas tracked Asian markets lower, with the Colombian > and Mexican pesos >, as well as Brazil's real falling more than 1.0 percent against the dollar.

Earlier in Asia, the Malaysian ringgit > hit a pre-peg 17-year low and South Korea's won > took its losses to 1.8 percent against the dollar this week.

Gold , seen as a good asset in difficult times, rose to its highest level in more than a month. Gold was up 0.47 percent at $1,158.60 an ounce.

Yields on safe-haven U.S. Treasuries slipped further, with the benchmark 10-year note > rising 10/32 in price, pushing its yield down to 2.0487 percent. [US/]

Lower Treasury yields and the stronger euro weighed on the dollar. The greenback traded at 122.17 yen >, the lowest in more than five weeks. Against the euro , the dollar fell 1.0 percent to $1.1356.

(Reporting by Herbert Lash; Editing by Nick Zieminski and Clive McKeef)