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World stocks, euro slide on fears Europe crisis response too slow

Source : REUTERS
Last Updated: Mon, Sep 26, 2011 07:41 hrs
World stocks, euro slide on fears Europe crisis response too slow

European stock index futures fell on Monday, following a slump in Asian shares, and the euro slid amid scepticism that Europe's latest efforts to contain its sovereign debt crisis can prevent it from wreaking more damage on the world economy.

A broad commodities rout continued, with precious metals, industrial metals and oil all in headlong retreat as investors rushed to take riskier bets off the table and preserve their capital.

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Gold fell nearly 5 percent, extending losses after sliding a record $100 an ounce on Friday as safe haven seekers abandoned the precious metal in favour of the dollar and U.S. Treasuries, while silver tumbled 15 percent.

The euro hit a 10-year low versus the yen, as hopes that EU leaders, under pressure from tumbling markets, might agree on bolder steps to ring-fence heavily indebted Greece, Portugal and Ireland were offset in investors' minds by a lack of detail about the proposals.

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"We believe this type of plan would be seen as a credible solution to the crisis," said Warren Hogan, chief economist at ANZ Bank in Sydney.

"However, this plan is still only in the 'rumour' stage, and it may face some tough hurdles in order to be passed by all EU authorities, indeed headlines are already suggesting some German dissent."

Euro STOXX 50 index futures futures fell 1.1 percent. Futures for Germany's DAX and France's CAC-40 also fell more than 1 percent, while spreadbetters called London's FTSE 100 to open lower.

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S&P futures fell nearly 1 percent, pointing to further losses for Wall Street as well later in the day.

MSCI's broadest index of Asia Pacific shares outside Japan fell 3.5 percent to its lowest in 16 months, after dropping 7.5 percent last week. Tokyo's Nikkei, fell 2.2 percent to its lowest close since April 2009.

After a weekend of being told by the United States, China and other countries that they must get more aggressive in their crisis response, European officials focused on ways to beef up their existing 440 billion euro ($595 billion) rescue fund.

But deep differences remained over whether the European Central Bank should commit more of its massive resources to shoring up Europe's banks and help struggling euro zone member countries.

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Global equity markets have been tumbling since late July, hammered by twin fears of renewed recession in the United States and worries that Europe's intractable debt woes could trigger another full-blown banking crisis.

MSCI's Asia ex-Japan index has lost almost 30 percent since its April high for the year, while the All-Country World index is 23.3 percent below its May peak.

Emerging Asian markets that were outperformers earlier this year have been hit hard as fund managers sell profitable assets to fund losses elsewhere or pile into the safety of cash. Thai stocks fell nearly 8 percent on Monday, and Philippine shares  4.2 percent.

The euro, which was threatening the $1.50 level in May, has also been under heavy pressure in recent weeks amid growing expectations among policymakers, investors and market economists that Greece may have to default on its debts.

"The lurch lower in risk appetite can only reflect a growing fear that policymakers will be incapable of acting in time or with sufficient potency to turn things around," said Herve Goulletquer, analyst at Credit Agricole.

"Given so much hinges on restoring confidence, not just of financial markets but of all economic agents, this trauma and the associated grim headlines risk tipping the global economy over the edge."

The single currency rose as high as $1.3585 in choppy trading on Monday, before falling back to $1.3395, down around 0.8 percent and not far from an eight-month trough of $1.3382 plumbed last week. Against the yen, the euro fell 1 percent to a 10-year low of 102.175 yen.

The dollar rose 0.4 percent against a basket of major currencies , while the yield on 10-year U.S. Treasuries, already at 60-year lows, fell further to around 1.8163 percent.

Commodities continued their slide, after being sold off across the board last week in a broad pullback from riskier assets and as the rising dollar increased the cost of dollar-denominated assets for holders of other currencies.

Oil extended losses, after falling to six-week lows on Friday as fears of renewed recession in the developed world raised worries of weaker demand.

U.S. crude fell 2.2 percent to 78.05 barrel and Brent crude lost 1.6 percent to $102.30.

Fears of flagging demand hammered industrial metals last week, when copper suffered its sharpest weekly decline in nearly three years.

Copper fell further on Monday, dropping 6.8 percent to $6,860 a tonne.

Gold also lost more ground, falling 4.7 percent to around $1,579.50 an ounce, while silver crumbled 15.1 percent.




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