NEW YORK (Reuters) - Major stock markets fell for a fifth week in six on Friday on growing worries about the global economy, while U.S. crude oil prices sank more than $2 on Saudi Arabia’s offer of more oil to Asian refiners.
The euro declined the most against the dollar in a month as concern over Greece’s debt crisis returned to center stage and investors scaled back expectations on the pace of future interest-rate hikes in the euro zone.
Fears the global economic recovery is stumbling grew after data showed China’s export growth slowed in May. That followed a barrage of reports in recent weeks showing the U.S. economy has hit a soft patch, which rattled investors.
World stocks as measured by the MSCI world equity index .MIWD00000PUS lost 1.5 percent on the day, posting their fifth down week in six. The index has lost 7 percent over the past six weeks, erasing almost all of its gains so far this year.
“We have had a slow erosion of economic numbers in the past quarter,” said Brian Battle, vice president of trading at Performance Trust Capital Partners in Chicago. “The economic numbers aren’t supporting this level of valuation.”
Wall Street fell sharply, with the Nasdaq ending in negative territory for the year and the Dow industrials closing below 12,000 for the first time since mid-March. The Dow and S&P 500 also closed out their sixth week of losses.
The Dow Jones industrial average .DJI ended down 172.45 points, or 1.42 percent, at 11,951.91. The Standard & Poor's 500 Index .SPX fell 18.02 points, or 1.40 percent, to 1,270.98. The Nasdaq Composite Index .IXIC lost 41.14 points, or 1.53 percent, to 2,643.73.
European shares fell to a three-month closing low and posted their sixth week of losses. The FTSEurofirst 300 .FTEU3 stock index dropped 1.4 percent to 1,089.55.
U.S. crude oil settled at $99.29 a barrel, down $2.64, after earlier falling to a session low at $98.60. Brent crude settled 79 cents lower at $118.78 a barrel, having risen to $120.07 earlier, the highest since May 5.
Top oil exporter Saudi Arabia is offering more oil to Asian refiners in July, industry sources with direct knowledge of negotiations said. It was the first evidence the kingdom is taking steps to raise supplies unilaterally after OPEC failed earlier this week to agree on an increase in the cartel’s production targets.
The euro fell 1.2 percent to $1.4338, on track for its biggest daily drop since May 11. It was down 1.2 percent at 115.18 yen, hurt by the lack of unity among euro-zone officials on a resolution of Greece’s debt troubles.
Adding to bearish sentiment, the European Central Bank kept its 2012 inflation forecast unchanged on Thursday after leaving rates at 1.25 percent, suggesting the pace of euro-zone interest-rate hikes may be slower than previously thought.
Investors received mixed messages about the progress of debt assistance to Greece. Germany stuck to its demand that private investors contribute to a second bailout even after renewed ECB opposition to any investor participation that might be deemed involuntary.
“The image of European policymakers and the ECB standing toe to toe on this particular issue is something investors find deeply unsettling,” said Michael Derks, chief strategist at FXPro.
Five-year credit default swaps on Greek government debt rose 25 basis points to 1,545 basis points, according to data monitor Markit. That means it costs 1.545 million euros to protect 10 million euros of exposure to Greek bonds.
Spanish, Portuguese and Ireland CDS all traded higher, while bonds issued by the euro zone’s most debt-laden economies came under pressure.
Losses in global equities drove Treasury prices up as investors flocked to lower-risk government debt. The benchmark U.S. 10-year Treasury note rose 7/32 in price to yield 2.97 percent, down from 3.00 percent late on Thursday.
Spot gold fell to a one-week low at $1,525.74 an ounce, before bouncing back to $1,529.66, hampered by the dollar’s strength and sharp losses in oil prices.
Additional reporting by Edward Krudy, Rodrigo Campos, Chris Reese, Robert Gibbons and Frank Tang; Editing by Dan Grebler