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Fears of global slowdown sink markets

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Jeremy Hobson: Stocks are down all over the world this morning as investors have their first chance to react to the Labor Department’s May jobs report that came out on Friday. It said only 69,000 jobs were created in the U.S. last month. But the gloomy market sentiment isn’t just about jobs.

Marketplace’s David Gura is with us live from Washington to explain. Good morning, David.

David Gura: Good morning, Jeremy.

Hobson: Well tell us what else is at play here?

Gura: Well obviously in Europe there is still a lot of concern about what’s happening there, and what’s going to happen there, with Greece, of course the old standby. But, we’re hearing a lot more about financial worries in Portugal and Spain. Spain is a big deal because it’s economy is so big. And today Portugal announced it’s going to draw more money from international lenders to keep its economy afloat.

But the European stuff — that’s been going on for a long time now in the background. I think what is really starting to scare investors is bad news from the so-called “emerging markets.” Economic growth appears to be slowing in China. Manufacturing grew at it’s weakest pace there since last year, and now we’re starting to see the same kind of slowdown in India and Brazil.

Hobson: But we’ve known about a lot of this for a while, so I guess the question is do we have a fundamental problem that people just woke up to on Friday, or are markets doing a little overreaction here?

Gura: When you talk to investors, you always need to translate. When investors say short-term, they mean quick reactions to market news.

Bruce McCain, the chief investment strategist at Key Private Bank, says that in this case we should be looking at the long term, and that’s the deeper, fundamentals of the economy.

Bruce McCain: It now looks worse than it probably is, from the longer-term standpoint, but it is still that sluggish, anemic growth cycle that we’ve been battling over the course of this entire recovery.

Gura: And fueling that of course is the economic uncertainty all over the world. With investors, Jeremy, you need a translation and you also need to know that if there is one thing they hate, it’s uncertainty.

Hobson: Indeed. Marketplace’s David Gura in Washington, thanks a lot.

Gura: Thanks Jeremy.

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