By Herbert Lash
NEW YORK (Reuters) - Global equity markets and government debt yields slumped on Friday as nagging concerns about the impact of the coronavirus on global growth overshadowed a strong U.S. jobs report that indicated an economy on pace to grow moderately.
Stocks on Wall Street retreated from record highs and safe-havens gold and the Japanese yen rose as investors weighed how much the virus is likely to disrupt supply chains. China accounts for about one-third of global growth.
The better-than-expected U.S. labor report failed to move the market as often occurs. Caution about the virus, which has inflicted 31,211 people and left 637 dead, dictated investor sentiment.
Nonfarm payrolls increased by 225,000 jobs in January, with employment at construction sites increasing by the most in a year amid milder-than-normal temperatures, the Labor Department said.
"Investors should be watching the effect of the coronavirus on the global supply chain and thus, on the global economy and corporate profits," said John Vail, chief global strategist at Nikko Asset Management.
While the amount and duration of the effect remains unknown, there is a chance the Phase 1 U.S.-China trade deal will be severely hampered and bilateral relations worsen again, he said.
Global supply chains have grown far more integrated, so disruptions from China have bigger ripple effects around the world, said Ron Temple, head of U.S. equity at Lazard Asset Management in New York.
While the coronavirus will be disruptive, for long-term investors it may pose an entry point into equities, Temple said.
The economy is doing fine, the U.S.-Sino trade spat is on hold and there is no apparent catalyst for stock valuations to fall, he said.
"At the same time you got interest rates that are really low, so that feeds into an equity market with incremental upside," Temple said.
MSCI's gauge of stocks across the globe <.MIWD00000PUS> shed 0.60%, moving away from highs this week that were shy of a record peak set early in January. Despite Friday's downturn, the index posted its best weekly gain since June.
Emerging market stocks lost 1.11% and the pan-European FTSEurofirst 300 index <.FTEU3> fell 0.25%. The blue-chip index notched its best week since late 2016.
On Wall Street, the Dow Jones Industrial Average <.DJI> fell 277.26 points, or 0.94%, to 29,102.51. The S&P 500 <.SPX> lost 18.07 points, or 0.54%, to 3,327.71 and the Nasdaq Composite <.IXIC> dropped 51.64 points, or 0.54%, to 9,520.51.
Gains for the Dow and S&P 500 were the best week since early June. For the Nasdaq, it was the best week since November 2018.
Benchmark 10-year U.S. Treasury notes <US10YT=RR> last rose 18/32 in price to push yields down to 1.5834%.
Euro zone bond yields fell after German industrial output data in December notched its biggest fall since January 2009, fanning concerns about the bloc's biggest economy.
German industrial production tumbled 3.5% on the month, exceeding expectations of a 0.2% fall.
French industrial production fell more sharply than expected in December as factories contended with nationwide transport strikes and a broader European slowdown.
Germany's benchmark 10-year Bund <DE10YT=RR> yield fell as low as -0.368%, before rising slightly.
The dollar slid and the yen rose after four days of selling, spurred by investor hopes China can contain the virus.
The dollar index <.DXY> rose 0.19%, with the euro <EUR=> down 0.32% to $1.0945.
The Japanese yen <JPM=> strengthened 0.21% versus the greenback at 109.77 per dollar.
In Asian trade, the yen halted a slide that had it set for its worst week in 18 months. [FRX/]
Oil prices slipped as Russia said it would need more time before committing to output cuts along with the Organization of the Petroleum Exporting Countries and other producers amid falling demand for crude as China battles the coronavirus.
Brent crude <LCOc1> futures fell 46 cents to settle down at $54.47 a barrel, while U.S. West Texas Intermediate (WTI) crude <CLc1> futures slid 63 cents to settle at $50.32 a barrel.
U.S. gold futures <GCv1> settled up 0.2% at $1,573.40 an ounce.
(Reporting by Herbert Lash; additional reporting by Sruthi Shankar in Bengaluru; Editing by Dan Grebler and David Gregorio)