European shares fell for the third day running today, while the euro and Spanish and Italian bonds came under fresh pressure.
Having rallied 15-20 per cent 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.
Asian shares fell today, with Japan's stocks sliding more than 1.5 per cent to a two-month low, and the safe-haven dollar firmed on concerns that the corporate results season will reveal weaker earnings in the face of flagging global economic growth.
Growth-sensitive commodities such as oil and copper and currencies like the Australian dollar were under pressure, while the retreat from riskier assets boosted safe-haven government debt, with Japanese government bonds (JGB) following US Treasuries higher.
Japan's Nikkei share average fell 1.9 per cent, while MSCI's broadest index of Asia Pacific shares outside Japan fell 0.5 per cent.
US stocks fell around 1 per cent yesterday, with shares of Intel, the world's largest semiconductor maker, losing 2.7 per cent after downgrades from at least two brokerages. S&P 500 futures traded in Asia slipped 0.2 per cent.
Asian technology stocks were hit by Intel's weakness, with the tech sub-index the biggest drag on the MSCI Asia ex-Japan with a 1 per cent decline. South Korean heavyweight Samsung Electronics fell 2.0 per cent.
Companies including FedEx, Caterpillar and Hewlett-Packard have warned about earnings, citing weak demand in Europe and China.
Thomson Reuters data shows analysts expect quarterly earnings for S&P 500 companies to decline about 2.3 per cent from the year-ago period, the first fall in three years.
The International Monetary Fund said in its semi-annual check on the world's financial health today that the euro area'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".
The report adds to the gloomy backdrop ahead of the IMF's meeting to be held in Tokyo later this week. Yesterday, the fund said the global slowdown was worsening and cut its growth forecasts for the second time since April.
Mounting pessimism about the corporate and macroeconomic outlook drove investors towards government debt, with the 10-year JGB yield falling half a basis point to 0.765 per cent, following a fall in benchmark Treasury yields yesterday.
"Currencies will generally take their cue from stocks," said Junya Tanase, chief FX strategist at JPMorgan Chase. "Markets overnight turned against risk and whether that will be reversed will depend on how equities react to US third-quarter earnings results."
Oil fell, with Brent crude dropping nearly 60 cents to below $114 a barrel, as growth worries overcame the supply concerns driven by 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."
Copper and gold prices were steady.
Reuters
