DJI - NEW YORK, May 31 (Reuters) - Stocks ended May with their largest loss in eight months and commodities also took a battering after a spate of worrying U.S. economic data on Thu rsday hit markets already reeling from Europe's debt troubles.
The euro had its worst performance since September too, repeatedly hitting a near two-year bottom.
U.S. bond yields fell to record lows as fears about Spain's troubled banks and Greece's possible exit from the euro zone spurred a global race for safe assets.
Many investors braced for another round of risk aversion on Friday should the monthly jobs report from the U.S. government contain weaker numbers than preliminary data issued by a payrolls processor on Thursday.
"Europe is the main issue, no question about it, but you have a supporting cast from the U.S. data," said Paul Zemsky, head of asset allocation at ING Investment Management in New York.
Spain remained the focal point of traders on growing speculation that Madrid would sooner or later ask for outside help to bail out its banks. Wall Street pared some of the day's losses on a report -- later denied -- of possible International Monetary Fund aid. But the European Commission has offered direct aid for a euro zone rescue fund to recapitalize distressed Spanish banks and more time for Spain to reduce its budget deficit.
Markets got an inkling of what was to come in Friday's U.S. jobs report after payrolls processor ADP said private employers created 133,000 jobs in May, fewer than the expected 148,000. New claims for unemployment benefits rose by 10,000 for the fourth straight weekly increase, the Labor Department reported.
Investors were dismayed by another report on economic growth and manufacturing in the U.S. Midwest that pointed to a slowdown.
At the close, the Dow Jones industrial average was down 26.41 points, or 0.21 percent, at 12,393.45. The Standard & Poor's 500 Index lost 2.99 points, or 0.23 percent, at 1,310.33. The Nasdaq Composite Index fell 10.02 points, or 0.35 percent, to 2,827.34.
For the month, the S&P 500 was down 6 percent -- its sharpest loss since September.
European stocks closed down 7 percent for May and global equities tumbled 10 percent -- also marking their worst showing since September.
Commodities fell even more, with crude oil futures plunging 15 percent for the month both in London and New York for their biggest loss since December 2008. Copper lost 11 percent for the month.
"There's a lot of instability in the world, and along with the weak economic signals there's going to be significant volatility that I don't expect to end anytime soon," said Don Steinbrugge, managing partner of Agecroft Partners in Richmond, Virginia.
The benchmark 10-year U.S. Treasury note rose 12/32 in price, its yield at 1.578 percent -- down from Wednesday's 1.6 percent levels, which already marked a 60-year bottom.
NO ECB HELP
In Europe, ECB President Mario Draghi ruled out hopes that the central bank would step in to ease the pressure in financial markets as EU leaders grappled with measures to tackle structural problems in the debt crisis.
"Can the ECB fill the vacuum of lack of action by national governments on fiscal growth? The answer is 'No,'" Draghi told the European Parliament. "Can the ECB fill the vacuum of the lack of action by national governments on the structural problem? The answer is 'No.'"
Concerns over Europe's debt crisis and the lack of a clear policy response have been rising since Spain unveiled unconvincing plans to recapitalize nationalized lender Bankia, raising the possibility it could need outside help.
Those worries kept Spain's 10-year bond yields at around 6.6 percent, not far from Wednesday's euro-era high of 6.79 percent and close to the crucial 7 percent mark, which has led to troubled nations like Portugal and Ireland needing bailouts.
The euro was last at $1.2358 to the dollar, after setting a 23-month low at $1.2335. The single currency was flat on the day and down nearly 7 percent on the month.
The flight from Spanish debt and Italian bonds, which are under threat of contagion from Spain, has boosted demand for the safety offered by German government paper.
Germany's two-year bonds traded just above zero percent on Thursday, while benchmark 10-year Bund yields hovered around their record low of about 1.25 percent.
NYMEX - NEWYORK, NEW YORK, May 31 (Reuters) - U.S. crude futures fell more than 1 percent on Thursday, and dropped 17.49 percent in May, as rising crude oil inventories, disappointing economic data and a deepening euro zone debt crisis pressured oil prices.
Crude stocks in the United States rose 2.21 million barrels in the week to May 25, the Energy Information Administration said in its weekly report. The increase exceeded expectations.
The 10th straight rise in crude stocks reported by EIA was counter to the industry's American Petroleum Institute report released on Tuesday that showed crude stocks fell 353,000 barrels.
The EIA reported gasoline stocks fell 833,000 barrels and distillate stocks fell 1.71 million barrels.
Crude stocks at Cushing, Oklahoma, delivery point for the U.S. light sweet crude contract, rose 54,000 barrels, the EIA said.
Crude stocks were expected to be up 600,000 barrels, gasoline stocks down 800,000 barrels and distillate stocks down 100,000 barrels, according to a Reuters survey of analysts taken ahead of the weekly inventory reports.
Oil and equities felt pressure from reports showing private payroll growth accelerated only slightly last month and claims for jobless benefits rose last week, indicating the U.S. labor market recovery was.
A separate report showed factory activity in the Midwest slowed this month and U.S. economic growth in the first quarter was a bit softer than initially estimated.
The U.S. May nonfarm payrolls report is due on Friday. The data are expected to show a rise of 150,000, after the economy added 115,000 in April.
Crude pared sharp losses of more than 2 percent in afternoon trading, after Dow Jones reported that the International Monetary Fund was considering a rescue loan to Spain.
But later, IMF Managing Director Christine Lagarde said there was no such plan.
CBOT SOYBEAN - May 31 (Reuters) - Chicago Board of Trade soft red winter wheat futures fell to their session lows at the close of pit trading at 1:15 p.m. CDT (1815 GMT) on Thursday, hitting their lowest level in two weeks due to pressure from the ongoing harvest of this year's U.S. crop, traders said.
* CBOT wheat fell 0.3 percent in May, its fourth straight monthly decline. Prices have dropped 3.1 percent during the past four months. CBOT wheat's last four-month losing streak ended in October 2008.
* The benchmark CBOT July wheat contract has fallen for three straight days. Kansas City Board of Trade hard red winter wheat futures and MGEX spring wheat also were lower on Thursday, with KCBT July off 1.6 percent.
* Analysts were expecting a weekly U.S. Agriculture Department report on Friday morning to show wheat export sales ranging from 350,000 to 500,000 tonnes, down from 827,000 a week earlier.
* Spot basis bids for hard red winter wheat in the U.S. Plains were steady to weaker on Thursday morning as the advancing harvest boosted the the supply available to the market.
* Rainfall during the past week in key grain-growing areas of Russia and Ukraine raised hopes that drought damage to crops in those areas will not get any worse.
FCPO - JAKARTA, May 31 (Reuters) - Malaysian palm oil futures slipped to near a one-week low on Thursday and notched their biggest monthly loss since September 2009 as they tracked a wide sell-off in commodities due to worries over the effect of the euro zone debt crisis on the global economy.
The hunt for safe-haven assets in Europe spread to Austrian and French bonds, although European shares and the euro regained some stability, as worries over Spain and its troubled banks weighed on market sentiment.
The benchmark August palm oil futures on the Bursa Malaysia Derivatives Exchange ended down 0.3 percent at 3,101 Malaysian ringgit ($980) per tonne. Prices, which earlier hit a low at 3,083 ringgit, have slipped more than 10 percent this month.
"Macro again," said a Jakarta-based palm trader. "Last night all European stock markets were much lower and the soybean complex was also lower.
"But the downside is limited due to a weaker ringgit."
Traded volumes stood at 15,106 lots of 25 tonnes each, compared with Wednesday's total at 17,601 lots.
Last week when no significant breakthrough was made in resolving Europe's debt crisis, the benchmark fell to its lowest this year at 2,993 ringgit per tonne.
Palm oil is set to revisit its May 23 low of 2,993 ringgit per tonne, driven by a wave (5), said Reuters market analyst Wang Tao based on technical analysis.
In related markets, oil edged up near $104 as buyers moved back in after Wednesday's heavy sell-off, but continuing nervousness around the demand outlook and the euro zone crisis kept oil on course for its biggest monthly percentage drop in two years.
Chicago corn and soybeans inched lower and were headed for their biggest monthly decline since September amid the deepening euro zone debt crisis.
Earlier this week, benchmark palm prices had risen to their highest in almost two weeks, buoyed by weather conditions in the United States.
Helping to stem losses in palm oil were expectations of a rise in demand from India and Pakistan for Ramadan, where fasting in the day is followed by feasting in the evening.
Indonesia kept its export tax for crude palm oil at 19.5 percent for June.
In Malaysia, the world's second-biggest palm oil producer after Indonesia, Prime Minister Najib Razak unveiled the $3.3 billion listing of palm oil giant Felda Global.
Data from Malaysia also showed palm oil product exports during May rose 2.4 percent to 1,382,091 tonnes from 1,349,642 tonnes shipped from April.
"Exports were within expectations," said a Kuala Lumpur-based trader. "But many are still hopeful of an improvement in shipments due to Ramadan."
Cargo surveyor Societe Generale de Surveillance said exports of Malaysian palm oil products for May fell 0.2 percent to 1,333,869 tonnes.
In other vegetable oil markets, the most active Dalian soyoil September contract eased 1 percent.
