World stocks, euro slide on caution over Europe crisis

Asian shares and the euro fell on Monday as investors reacted cautiously to reports that European leaders were working on new ways to stop the fallout from the euro zone sovereign debt crisis wreaking more damage on the world economy.

Gold slipped further, after sliding a record $100 an ounce on Friday as safe haven seekers abandoned the precious metal in favour of the dollar and US Treasuries.

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Trading in the euro was volatile, as hopes that EU leaders, 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.”

MSCI’s broadest index of Asia Pacific shares outside Japan fell 0.5 percent, after dropping 7.5 percent last week. Tokyo’s Nikkei, which was closed for a holiday on Friday as regional markets sank, fell 1.7 percent.

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 ($594.8 billion) rescue fund.

But 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.

Euro pressured

Global equity markets have been tumbling since late July, hammered by the 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 fallen 27.8 percent since its April high for the year, while the All-Country World index is 22.9 percent below its May peak.

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 single currency rose as high as $1.3585 in choppy trading on Monday, before pulling back to around $1.3435, down around 0.5 percent and not far from an eight-month trough of $1.3382 plumbed last week.

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

US crude was flat around $79.89 a barrel and Brent crude eased 0.2 percent to $103.77.

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 0.8 percent to $7,300 a tonne.

Gold also lost more ground, falling 0.7 percent to around $1,645 an ounce.

Reuters