European shares and the euro fell on Thursday on fears the euro debt crisis is flaring up again, crimping investors' appetite for riskier assets ahead of a long holiday weekend for many global markets.
Chinese shares bucked the softer global trend, posting their biggest single-day rise since early February led by non-banking financials after Premier Wen Jiabao said the monopoly formed by the country's big banks needed to be broken to get money flowing to cash-starved private firms.
Global stocks dropped more than 1 percent and gold tumbled to its lowest in nearly three months on Wednesday as euro zone worries, centred on Spain's public and private sector debt burdens, added to concerns that markets won't get another round of monetary stimulus from the U.S. Federal Reserve.
Lower-rated euro zone government bonds remained under pressure, supporting safe-haven German debt and U.S. Treasuries, but the sell-off in global stocks paused before U.S. non-farm payrolls data on Friday.
Data showing British factory output suffered its biggest monthly fall in almost a year in February did little to soothe fears about the economic recovery in Europe though its impact on European shares was limited.
The FTSEurofirst 300 index fell 0.5 percent, pulling the MSCI world equity index down 0.1 percent.
"There is still worry about Spain and it is a four-day weekend and investors do not want to be long going into it as they do not know what potential news could come out," Will Hedden, sales trader at IG Index, said.
German government bond prices jumped to three-week highs as Spanish 10-year yields rose five basis points to 5.77 percent, near levels last seen before the European Central Bank first flooded banks in December with cheap three-year funds.
Equivalent Italian yields, which rose in tandem with Spain as investors fretted about the government's ability to meet budget deficit targets, were up four basis points at 5.42 percent.
Spanish yields jumped 30 basis points on Wednesday after borrowing costs jumped at the country's auction of bonds, expanding the yield premium over German benchmarks to 392 basis points, its widest since late November.
"There's been a lot of negative news on Spain over a sustained period of time but market sentiment was being buoyed by strong auction results until yesterday," said Rabobank rate strategist Lyn Graham-Taylor.
"It's quite a dangerous time and if the market starts to panic then the sky's the limit (for borrowing costs), although you may see some policy action come into play."
The euro fell against the yen as concerns about a deteriorating outlook for the euro zone economy and shaky public finances in the region's indebted countries kept the shared currency under pressure.
It fell to 107.047 yen, its weakest since March 8, and plumbed a three-week low against the dollar of $1.3103. The euro's fall helped lift the dollar index by 0.3 percent to 79.955.
The euro and high-yield currencies have also been under pressure against the dollar after Federal Reserve policy meeting minutes released on Tuesday showed the U.S. central bank was becoming less eager to print more money to bolster the economy.