GLOBAL MARKETS-Stocks fall, bonds rally on weak U.S. data

(Recasts; adds U.S. markets' early action , changes byline; previous LONDON)
Fri Apr 4, 2008 10:30am EDT
By Herbert Lash

NEW YORK, April 4 (Reuters) - U.S. and European stocks fell and government debt prices climbed on Friday after the biggest monthly decline in U.S. payrolls in five years confirmed to many that the struggling U.S. economy may be in recession.

The dollar fell against the yen and oil rose, triggered by the dollar's fall. Gold futures in New York recouped early losses and turned higher.

U.S. employers cut payrolls for the third month in a row in March, slashing 80,000 jobs, or about 25 percent more than economists had expected.

"The recessionary winds are hitting the economy with even greater force with the loss of jobs for a third month," said Chris Rupkey, senior financial economist at Bank of Tokyo-Mitsubishi UFJ in New York.

The data reinforced the likelihood that policy-makers at the Federal Reserve will cut interest rates when they meet later this month.

Prospects now call "for the Fed to cut the funds rate by a half percentage point instead of a quarter percentage point," said William Sullivan, chief economist at JVB Financial Group in Boca Raton, Florida.

Benchmark indexes on Wall Street fell. The Dow Jones industrial average .DJI was down 79.14 points, or 0.63 percent, at 12,546.89. The Standard & Poor's 500 Index .SPX slipped 3.91 points, or 0.29 percent, at 1,365.40. The Nasdaq Composite Index .IXIC declined 6.88 points, or 0.29 percent, at 2,356.42. Continued...