* MSCI world index drops 0.3 pct
* On course for more than two-pct loss on the week
* European shares extend losses to third day
* Euro hits 2-month low vs dollar
* Gold firms, set for biggest weekly gain since January
By Richard Hubbard and Marc Jones
LONDON, Nov 9 World shares are on course for
their worst weekly performance since June, depressed by Europe's
debt troubles and the looming "fiscal cliff" that could slash
U.S. public spending.
Even better-than-expected Chinese economic data for October,
which pointed to a modest rebound in the world's second largest
economy, failed to stem the declines on Friday.
The MSCI world equity index was down 0.3
percent at around 322.5 points by 1230 GMT. It has lost over two
percent since Monday and looked set to close on Friday with a
decline steeper than any other week since June.
"Concerns about the U.S. fiscal cliff and the situation in
Europe have been prompting investors to take some risk off the
table," said James Butterfill, global equity strategist at
London private bank Coutts.
U.S. stock futures signalled a third day of falls for
Wall Street when trading resumes. Data due out later includes
the Thomson-Reuters University of Michigan sentiment survey
where a small pickup to 83 from 82.6 is forecast.
In a further sign of nervousness, the dollar fell to its
lowest in three weeks against the yen, which is often a refuge
in times of stress. The greenback hit 79.21 yen, its
lowest level since Oct. 19 and down 0.3 percent on the day.
"You've only got to look at what's happening in the gold
market, and with the equity markets falling quite heavily, that
is playing back into strong demand for the yen," said Adam
Myers, senior currency strategist at Credit Agricole CIB.
Gold hit a three-week high of $1,737.60 an ounce.
Prices for safe-haven U.S. Treasuries extended their gains
for the week after the U.S. elections on Tuesday raised fears
that Washington's politicians may struggle to find a compromise
to cut the budget deficit before nearly $600 billion of spending
cuts and tax increases kick in early in 2013.
Markets are also watching the U.S. debt ceiling, which needs
to be raised to avoid a government shutdown.
The price increase in the benchmark U.S. Treasury 10-year
note pushed the yield down 3 basis points to 1.59 percent.
In Europe falling industrial output in France, Italy and
Sweden and a warning from a German ministry that the country's
economy - Europe's largest - was expected to slow further in the
fourth quarter and the first three months of next year, rattled
The FTSE Eurofirst 300 index of top European shares
was down 0.7 percent to 1090.20 as London's FTSE 100,
Paris's CAC-40 and Frankfurt's DAX fell between
0.5 and 1.3 percent.
A worried German finance minister, Wolfgang Schaeuble, has
asked a panel of economic advisers to look into reform proposals
for France. Reported exclusively by Reuters, the unusual move
reveals the depth of concern in Berlin at the weakness in the
euro zone's second largest economy.
"Germany has benefited from the euro zone debt crisis in a
way because a weaker euro helped its exports. But Germany
appears to be starting to suffer from deterioration in the euro
zone economy," said Mitsuru Saito, chief economist at Tokai
Tokyo Securities in Tokyo.
A senior EU official also told Reuters it was unlikely
ministers would reach agreement on Monday on whether to release
Greece's next aid tranche and that another meeting would
probably be needed.
"We still have the situation in Greece; the volatility
indexes are showing that investors are not too worried at the
moment - but that can change quickly so politicians need to act
quickly," said Emile Cardon, a market economist at Rabobank.
German government bonds, favoured by risk-averse investors,
rose; Bund futures added 23 basis points on the day to
reach 143.20, adding to gains of more than a full point since
last Friday's close.
The euro hit a two-month low against the dollar, down 0.3
percent at $1.2714, and was seen vulnerable to further
"There has been a rather poisonous cocktail that is dragging
the euro down, with weak European numbers today, renewed fears
of the euro zone crisis with Greece back on the agenda," said
Arne Lohmann Rasmussen, head of currency research at Danske
In industrial commodity markets the better news from top
consumer China only partially offset the worries over the U.S.
and European economies.
The Chinese numbers showed factory output and retail sales
for October rising by more than expected, while inflation dipped
to its slowest pace in nearly three years, giving policymakers
scope to further loosen monetary policy.
That came right on cue for the start of the week-long
leadership changeover in the ruling Communist Party.
U.S. crude oil prices down 50 cents to $85.43 a
barrel. Brent futures were down 40 cents to just below
$107 a barrel.
"Politics is going to take centre-stage as far as commodity
markets are concerned," said Natalie Rampono, a commodity
strategist at ANZ.
In Asian trading, Thursday's losses in global stocks weighed
on Japan's Nikkei stock average which closed 0.9 percent
MSCI's broadest index of Asia-Pacific shares outside Japan
eased 0.2 percent on top of the previous day's
1.3 percent slide, its biggest one-day percentage drop in two
months, leaving it 0.4 percent down on the week.