World stocks slid, the euro shed more than 1 per cent and oil prices dived today as a new round of fear gripped markets that Greece may default on its debt and trigger economic fallout that would cascade throughout the euro zone.
European officials ended a weekend meeting without agreeing on new ways to tackle the debt crisis, and a call by US treasury secretary Timothy Geithner at the meeting for more fiscal stimulus was rejected. International lenders told Greece today that it must shrink its public sector and improve tax collection to secure a vital €8 billion rescue payment next month.
Worries that the crisis was worsening prompted investors to seek refuge in the US dollar and Treasuries. But gold, which often benefits from safe-haven flows, retreated nearly $30 on the stronger dollar.
World stocks as measured by the MSCI world equity index fell 2.1 per cent on the day, after posting the biggest weekly gain since early July last week.
On Wall Street, US stocks fell for the first time in six sessions. The Dow Jones industrial average was down 198.75 points, or 1.73 per cent, at 11,310.34. The Standard & Poor's 500 Index was down 20.35 points, or 1.67 per cent, at 1,195.66. The Nasdaq Composite Index was down 27.09 points, or 1.03 per cent, at 2,595.22.
European stocks ended about 2.3 per cent lower. The STOXX Europe 600 Banks index fell 3.2 per cent to feature amongst the worst performers Emerging stocks dropped 3 per cent.
"There will be additional volatility in the global financial markets heading into the end of the month as the pressure to get Greece and others to enact their reforms will be white-hot intense," said Andrew Busch, global currency strategist at BMO Capital Markets in Chicago.
Finance ministers of the Bric emerging economies - Brazil, Russia, India and China - will meet this week to discuss support for the euro zone.
With gloom widespread, investors took little comfort from expectations that the Federal Reserve would introduce new measures to stimulate the U.S. economy when it meets tomorrow and on Wednesday.
The US central bank is widely expected to try to push already low long-term interest rates even lower by tilting toward longer-duration bonds in its portfolio.
The euro shed 1.2 per cent to $1.3632, and traders braced for a move to last week's seven-month low of $1.3495. Losses in the euro helped push the dollar 0.9 higher against a basket of currencies.
The yen also benefited from a safety bid, with the euro down 1.6 per cent. The dollar slipped 0.4 per cent to 76.43 yen.
Gold last traded around 1780.59 a troy ounce, retreating from the day's high of $1,827.36. a stronger U.S. currency makes dollar-denominated metals more expensive for holders of other currencies. The precious metal hit a record high of $1,920.30 on
September 6th.
In other commodities, oil fell more than $2 per barrel on concerns Europe's debt crisis would hit commodity demand. Brent crude fell $3.05 to $109.17 a barrel. U.S. crude slipped $2.86 to $85.10.
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