World stocks, euro slide on euro zone worries
NEW YORK (Reuters) - World equity markets slid on Monday and the euro fell as investors turned cold on efforts in Europe to tighten euro zone fiscal rules to prevent the region's debt crisis from deepening, which would throttle global growth.
Adding to the sour sentiment, European finance ministers looked unlikely to reach a target to boost resources from the International Monetary Fund by up to 200 billion euros after Britain declined to take part in a plan to help the euro zone.
U.S. stocks skidded about 1 percent and European shares closed lower in thin trade as weak Chinese housing data also fueled worries about demand and hurt mining stocks.
The fading of optimism about a solution to the euro zone debt crisis came as the finance ministers assessed plans for a new "fiscal compact" they hope to wrap up by the end of January.
Comments by Mario Draghi, president of the European Central Bank, also weighed on sentiment after he said the euro zone's economic outlook faced substantial downside risks. He also said that 2012 would be a difficult year for banks.
Shares of the biggest U.S. financial institutions dropped sharply, with Bank of America Corp (BAC.N) closing below $5 a share for the first time since the depths of the market's downturn during the financial crisis in March 2009.
Citigroup Inc (C.N) fell 4.7 percent to $24.82.
"If you add up all the factors facing banks, this just isn't a good environment for financials, and since the lion's share of the worry in the market is related to financials, a bad deal for them means a bad day for everyone," said Mike Shea, managing partner and trader at Direct Access Partners LLC in New York.
The Dow Jones industrial average .DJI closed down 100.13 points, or 0.84 percent, at 11,766.26. The Standard & Poor's 500 Index .SPX fell 14.31 points, or 1.17 percent, to 1,205.35. The Nasdaq Composite Index .IXIC slid 32.19 points, or 1.26 percent, to 2,523.14.
In Europe, the FTSEurofirst 300 index .FTEU3 of top regional shares fell 0.1 percent to close at 957.45 points. Global equities as measured by MSCI's all-country world index fell 1.2 percent.
Concerns about the debt crisis kept the euro near 11-month lows, while the dollar got a safety bid as investors reacted to the uncertainty created by the death of North Korean leader Kim Jong-il.
The euro also came under pressure after Fitch warned late Friday that it could downgrade France and six other euro zone countries because a comprehensive solution to the debt crisis is "technically and politically beyond reach."
Euro zone crisis in graphics: r.reuters.com/hyb65p
Euro zone meetings in 2011: link.reuters.com/van64s
European bank exposure: link.reuters.com/nyk23s
The euro lost almost 0.4 percent at $1.2994 versus the dollar. It hit an 11-month low last week of $1.2945.
U.S. government debt prices rose as the declines in equity markets boosted the bid for safe-haven U.S. government debt.
The benchmark 10-year U.S. Treasury note was up 12/32, the yield at 1.81 percent.
Oil prices pared gains, with U.S. crude near flat.
Brent crude futures rose 29 cents to settle at $104.64 a barrel. U.S. crude futures settled up 35 cents to $93.88 a barrel.
U.S. gold futures for February delivery closed down $1.20 an ounce at $1,596.70.
(Reporting by Herbert Lash; Editing by Kenneth Barry, Dan Grebler, Leslie Adler)
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