World stocks fell on Friday on investor worries that a U.S. plan to stimulate jobs and growth will be held up in Congress and may not be followed fast enough by action from the Federal Reserve.
The euro hit six-month lows against the dollar and the yen with more falls likely after the European Central Bank shifted away from further rises in interest rates, a key driver in the single currency's rally this year.
U.S. shares were poised for a weaker open, extending Thursday's falls after Federal Reserve Chairman Ben Bernanke left the door open for new stimulus measures but stopped short of signalling the central bank would take the plunge.
Markets are concerned that President Barack Obama's proposed $447 billion package of tax cuts and spending plans aimed at boosting growth and job creation could be hamstrung by political wrangling.
"Investors are holding back...There isn't any reason to commit until you can see credible policies," Justin Urquhart Stewart, director at Seven Investment Management, said.
"Bernanke was never going to say anything. He made it clear at Jackson Hole he was pushing it back to the politicians. Obama has come up with this stimulus package. We now have to digest what effect this will have, assuming it is passed."
European shares fell as much as 1.1 percent, pulling down the MSCI world equity index 0.7 percent. S&P index futures were last down 0.6 percent, pointing to a lower start on Wall Street.
Market confidence has been fragile this week due to growing concerns over the global economy and Europe's debt crisis, with Friday's deadline for bond holders to decide on Greece's swap offer adding to the nervousness.
G7 finance ministers and central bankers meet later on Friday and the faltering global recovery and Europe's problems are the main issues of the day.
Host France has called for co-ordinated action to boost growth, but the divergent economic problems facing the United States, Britain and the euro zone are complicating the task.
One G7 source told Reuters a unanimous agreement in Marseille on coordinated monetary easing was unlikely but there has been some speculation on markets the meeting would generate more than just words.
"There is some expectation doing the rounds that the G-7 meeting will produce a key coordinated policy response. We have our doubts," Lloyds strategists said in a note.
"In this environment, while acknowledging scope for bouts of near-term risk-asset buoyancy, we continue to anticipate money flowing into higher-grade fixed-income product into yield back- ups."
The retreat in equities boosted safe-haven German government bond prices, with Bund futures jumping one full point to a record high of 137.45.
The euro was last down 0.4 percent against the dollar at $1.3832, its lowest in nearly six months with traders saying selling in the single currency accelerated when stop-loss orders were triggered below $1.3840.
Analysts saw more downside as sentiment stays negative after the ECB dropped its tightening bias and investors believe a lasting solution to the euro zone crisis remains elusive.
"The ECB has now left the door open for an easing of policy and there are more downside risks to come for the euro with Greek PSI (private sector involvement) to be finalised and ratification of the EFSF (rescue fund) still required." said Kiran Kowshik, currency strategist at BNP Paribas.
The euro's retreat helped drive the dollar to two-month highs against a basket of currencies . The greenback also hit three-and-a-half month peaks versus the Swiss franc and a one-month high against the yen .
Gold, propelled to a series of records in recent months due to its appeal as both a safe haven and hedge against inflation, reversed earlier gains. Itwas last down 1.7 percent at $1,837 an ounce as nervous investors sold the metal on growing concerns its run-up to record highs had been overdone.
Oil also fell as the dollar's climb made it more expensive for holders of other currencies, with U.S. crude futures trading 1.5 percent down at $87.70 a barrel and Brent crude 0.4 percent lower at $114.09.