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NEW YORK (Reuters) - World stocks and commodities sank on Thursday after an unexpected trade deficit in China fueled concerns about the global economy, while the euro fell after a downgrade of Spain's credit rating by Moody's.
Stocks were pushed even lower and oil prices erased part of early losses in the afternoon as police confronted protesters in Saudi Arabia. Witnesses said shots were heard and some people were wounded.
Asian stocks looked set to open lower, with Nikkei futures traded in Chicago falling more than 2 percent to 10,335.00.
Investors fear unrest could spread from Libya to other oil-producing nations in the Middle East, driving energy costs higher and choking off the global economic recovery.
"Saudi Arabia is the main supplier of oil around the world, so people are concerned," said Axel Merk, president and chief investment officer of Merk Investments in Palo Alto, California.
"People are starting to realize that the turmoil in the Middle East is going to affect oil supplies for a long, long time," he added.
Still, U.S. crude oil prices fell 1.6 percent to $102.70 a barrel as investors fretted about negative economic data from China, the world's second-largest consumer of oil. Brent prices ended 51 cents lower at $115.43.
China posted a trade deficit of $7.3 billion for February -- its first since March 2010 and the biggest since February 2004 -- as its exports suffered a larger-than-expected impact from the Lunar New Year holiday.
U.S. stocks fell nearly 2 percent and the Dow sank below 12,000. Wall Street was also pressured by an unexpectedly large increase in claims for unemployment benefits in the United States and a much wider-than-expected U.S. trade deficit.
"Overseas issues continue to play a role in U.S. markets. The situation in Europe isn't complete, the market continues to have concerns about sovereign credit," said Subodh Kumar, chief investment strategist at Subodh Kumar & Associates in Toronto.
"Markets have been hoping that China would lead the recovery, but when you put this (U.S.) data with slower growth out of China, the idea that everything looks normal is going away."
The Dow Jones industrial average .DJI lost 228.48 points, or 1.87 percent, to 11,984.61, while the Standard & Poor's 500 Index .SPX fell 24.91 points, or 1.89 percent, to 1,295.11. The Nasdaq Composite Index .IXIC lost 50.70 points, or 1.84 percent, to 2,701.02.
In Europe, the FTSEurofirst 300 .FTEU3 index of top shares closed down 1.13 percent at 1,131.78, its lowest closing level for 2011.
Global stocks measured by MSCI's All-Country World Index .MIWD00000PUS slid 1.9 percent.
The euro fell 0.8 percent to $1.3796 after Moody's downgraded Spain to Aa2 from Aa1, warning of further cuts to the country's credit ratings.
The move came two days after Moody's downgraded Greece by three notches, fueling negative sentiment toward struggling euro zone sovereign borrowers on the eve of a summit of currency bloc leaders.
"This is a reminder they need to come up with a comprehensive, believable solution by the end of the month," said Colin Ellis, chief economist at BVCA.
Demand for safe-haven assets was supported by the euro-zone debt concerns and the Middle East instability, encouraging investors to bid aggressively for reopened 30-year bonds during an auction in the afternoon.
Benchmark 10-year U.S. Treasury notes rose 29/32 in price, with the yield at 3.3621 percent, while 30-year bonds gained 54/32 in price, with the yield at 4.5023 percent.
Additional reporting by Herbert Lash, Caroline Valetkevitch, Chris Reese; Editing by Kenneth Barry and Dan Grebler