World Stocks Sink, Markets Brace For Jobs Data
World stocks and the euro slipped on Friday while core government bonds rose as concerns about the euro zone debt crisis resurfaced and investors braced for jobs data that could signal the U.S. economy is heading for recession.
Confirmation that Greece will miss its 2011 deficit target of 7.6 percent and uncertainty over Italy's commitment to austerity measures underscored unease about the single currency zone, prompting investors to shy away from riskier assets.
The U.S. employment report, due at 1230 GMT, is expected to show an increase of 75,000 jobs, down from 117,000 in July.
"I think the job figures are going to be worse than expected. It could be a wake-up call for the market and share prices could go down even further," said Koen De Leus, strategist at KBC Securities in Brussels.
"Expectations of QE3 (another round of U.S. quantitative easing) have helped shares in the past days, but at the end of the day, the market needs a better economic environment that stimulates growth and company results."
MSCI's world equity index lost 0.7 percent. It was still on track for a second consecutive weekly gain after a volatile August that pushed the benchmark index to an 11-month low at one point.
European stocks fell 1.7 percent after rising so far this week, while emerging stocks dropped 0.7 percent following a five-day rally.
U.S. crude oil was down 0.9 percent at $88.17 a barrel.
Bund futures rose 54 ticks, supported by weak demand at this week's Italian and Spanish debt sales and dismal manufacturing figures on Thursday.
Talks between Greece and international inspectors on a new aid tranche were put on hold, after a senior government official told Reuters on Thursday that Greece expects its 2011 budget deficit to reach 8.1 to 8.2 percent of GDP. ID:nL5E7K20W1].
European Central Bank President Jean-Claude Trichet told Italy's struggling centre-right government to deliver on its promised austerity package, adding to international pressure on weakened premier Silvio Berlusconi.
ECB support is vital because the bank has been buying Italian bonds in markets to keep yields low enough for Rome to continue borrowing without external aid.
The euro lost a quarter percent to a three-week low around $1.4207.
"It's hard for the euro to go down very fast against the dollar given expectations for more monetary easing in the U.S. But if we continue to get worst-case scenarios panning out in the euro zone it will have to go lower," said Adrian Schmidt, currency strategist at Lloyds Banking Group.
The dollar rose 0.1 percent against a basket of major currencies.