By Marc Jones
European shares fell for the third day running on Wednesday, while the euro and Spanish and Italian bonds came under fresh pressure as economic anxiety was compounded by stuttering progress in the euro zone's battle against its debt crisis.
Having rallied 15-20 percent between June and September, the majority of major markets, from equities to commodities, have been trading far more cautiously in recent weeks as the benefit of central bank support has made way for a return of concerns about growth and European debt.
The Euro STOXX 50 index of European bluechip firms, which has lost over 2 percent in the last week, slipped 0.2 percent. London's FTSE, Frankfurt's DAX and France's CAC were all down.
"The markets will be a little bit on the defensive, with concerns over Greece and Spain," said Berkeley Futures associate director Richard Griffiths.
In its semi-annual check on the world's financial health, the International Monetary Fund said the euro zone's debt crisis was the main threat and the risks to global financial stability had risen in the last six months, leaving confidence "very fragile".
In Asia, Japanese stocks slid 2 percent to a two-month low after U.S. earnings underscored the worries about global growth, leaving the MSCI index of global stocks down 0.25 percent.
In the currency markets the dollar firmed as investors looked to safe-haven assets.
The euro slipped to its lowest level since the start of the month. At 0710 GMT it was trading at $1.2862, having dipped as low as 1.2835, close to an important technical support of its 200-day average.
Spanish bond yields were also rising as Madrid keeps markets guessing over whether it will request an international bailout. Violent protests against German Chancellor Angela Merkel when she visited Greece on Tuesday underlined how far the debt crisis is from resolution.
Growth-sensitive commodities such as oil and copper and currencies like the Australian dollar were under pressure, while the retreat from riskier assets boosted Japanese government bonds (JGB) and U.S. Treasuries.
Oil fell, with Brent crude down 0.4 percent to around $114 a barrel, as the growth concerns overcame the effect of tensions in the Middle East that had been pushing crude higher in recent days.
"Oil has been falling as investors weigh supply risks against weaker demand," said Ben Le Brun, a market analyst at OptionsXpress in Sydney. "A lot of growth expectations are being revised down, especially in China," he added.
(Additional reporting by Sudip Kar-Gupta; editing by David Stamp)