(Updates with fresh prices, close of European markets)
* MSCI world stocks index sees biggest fall since March
* Asia stocks retreat after 10 days of gains
* Bonds rally as Fed mulls yield curve control, guidance
* Oil tumbles towards first weekly fall since April
* World FX rates in 2020 http://tmsnrt.rs/2egbfVh
By Herbert Lash
NEW YORK, June 11 (Reuters) - Global equity markets fell
sharply on Thursday in their worst sell-off since markets
crashed in March, while safe-haven assets rose after the Federal
Reserve's sobering outlook cast doubt on hopes for a V-shaped
recovery from the coronavirus pandemic.
Stocks on Wall Street slid, a 10-day winning streak in Asia
came to a halt .T and major European bourses tumbled about 4%,
snuffing a recent rally that had recouped much of the market's
deep losses and even drove the Nasdaq to record highs this week.
U.S. Treasury and euro zone government bonds rallied after
the Fed signaled it plans years of extraordinary support to
counter the economic fallout from a still spreading pandemic.
The number of Americans seeking jobless benefits fell last
week, but millions laid off due to COVID-19 continue to receive
unemployment checks, suggesting the U.S. labor market could take
years to heal even as hiring resumes. The Fed is not painting a perfect V-shaped recovery and is
going to be ultra-accommodative for a very long time, said Esty
Dwek, head of global market strategy at Natixis Investment
Managers in Geneva.
"Suddenly the question is, 'Well, why are they going to be
so accommodative if the recovery is going so well?'" she said.
Some of the sell-off "is probably just by not being the
V-shape the market is priced for right now, and some of it is
taking a breather after the last few weeks," Dwek said.
In a reality check to the stock market's recent euphoria,
the Fed predicted the U.S. economy would shrink 6.5% in 2020 and
unemployment would still be at 9.3% at year's end. MSCI's all-country world index .MIWD00000PUS , which tracks
shares in 49 nations, fell 3.74% to 519.56, its biggest slide
since March 18. Europe's broad FTSEurofirst 300 index .FTEU3
closed down 4.11% at 1,378.16.
On Wall Street, the Dow Jones Industrial Average .DJI fell
1,393.12 points, or 5.16%, to 25,596.87. The S&P 500 .SPX lost
136.43 points, or 4.28%, to 3,053.71 and the Nasdaq Composite
.IXIC dropped 355.19 points, or 3.54%, to 9,665.16.
Fed Chair Jerome Powell on Wednesday at the end of a two-day
meeting of policymakers confirmed the Fed was studying yield
curve control, a form of easing already employed by Japan and
Australia.
John Vail, chief global strategist at Nikko Asset Management
in Tokyo, said in his view the Fed is moving toward yield curve
control, which should keep 10-year yields at 1% or less and will
tend to suppress the dollar, at least for a while.
Yields on 10-year Treasury notes dropped sharply from last
week's peak of 0.96%. US/ The 10-year Treasury note
US10YT=RR fell 7.7 basis points to yield 0.6739%, while German
10-year bund DE10YT=RR yields fell 8.9 basis points to
-0.414%.
The yen rose to a one-month high against the dollar, while
the Swiss franc CHF= climbed to a three-month peak. The euro
also rose, leaving open the possibility of more downside for the
dollar.
The euro EUR= fell 0.29% to $1.1336, and the yen JPY=
slid 0.31% to $106.7600.
Gold futures GCcv1 rose more than 1%.
SECOND WAVE
Market sentiment also took a hit as new coronavirus
infections in the United States showed a slight increase after
five weeks of declines, only part of which was attributed to
more testing. Eric Toner, a senior scholar at the Johns Hopkins Center for
Health Security, said, "There is a new wave coming in parts of
the country. It's small and it's distant so far, but it's
coming."
Oil prices tumbled, fueled by renewed concerns about demand
destruction as new cases of coronavirus tick up globally, while
the United States saw another large build in crude inventories.
O/R
Brent crude LCOc1 futures fell $3.01, or 7.21%, to $38.72
a barrel. U.S. crude CLc1 slid $3.15, or 7.95%, to $36.45 a
barrel.
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Asia stock markets https://tmsnrt.rs/2zpUAr4
Asia-Pacific valuations https://tmsnrt.rs/2Dr2BQA
World stocks rally runs into resistance https://tmsnrt.rs/3cWio6m
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