The euro sank to four-year lows on Monday and stocks and commodities fell as increasing market volatility prompted investors to shed even more risky bets.
Disappointing U.S. jobs data on Friday and fears that euro zone debt problems were worsening spurred already nervous investors to face up to the risk the recovery of the world economy is faltering, although few see a recession as likely.
The sell-off looked set to persist in Europe, with financial spreadbetters expecting Britain's FTSE 100 <.FTSE 100>, Germany's DAX <.GDAXI> and France's CAC-40 to open between 1.3-2.2 percent lower.
There's a real sense of investors taking their money out of risky assets, said Nagayuki Yamagishi, a strategist at Mitsubishi UFJ Morgan Stanley Securities.
The euro zone worries seem set to be with us for a while.
The euro, which has turned into the barometer for investor risk appetite in recent weeks after Greece's debt crisis, fell below $1.1900 to its lowest in more than four years at one point.
Comments from Hungary's government on Friday that it might suffer a Greece-style debt crisis continued to cast a pall over the market, giving investors a reason to sell the euro.
Analysts said the controversial remarks from Hungary were politically motivated and belied Hungary's economic fundamentals, which were far better than Greece's, but investors paid no heed.
Against the yen, the euro skidded below 108.33 yen to an eight-year trough.
A stronger yen punished Japanese stocks, with exporters particularly hard hit.
Japan's Nikkei index <.N225> had its worst day in 14 months, falling 3.8 percent. The MSCI index for Asian stocks outside Japan <.MIAPJ0000PUS> also shed 3.8 percent.
S&P futures fell 0.8 percent, pointing to further losses in U.S. stocks later in the day, having already fallen on Friday to their lowest since February <.N>
The Australian dollar and the South Korean won, both of which are extremely vulnerable to turns in demand for risk, also suffered.
The Australian dollar struggled at $0.8136. The won fell to as far as a two-week low of 1,237.4/8.6 per dollar.
Assets with safe-haven appeal benefited from the scramble out of risk. Investors sought safety in the liquidity of U.S. Treasuries, with 10-year Treasury yields dropping to 13-month lows of 3.17 percent.
Demand for U.S. government debt fueled demand for the U.S. dollar. The U.S. dollar index <.DXY> hit a 15-month high of 88.7.
A firmer U.S. dollar, together with the threat to the world economic recovery, pushed commodity prices lower.
Oil fell 1.6 percent to $70.36 a barrel by 0640 GMT, and Shanghai copper, zinc and aluminum futures sank across the board.
NO RESPITE YET FOR EURO
Friday's U.S. economic data had showed the recovery in the labor market was not as strong as hoped, with hiring by U.S. private employers slowing sharply in May.
Although some analysts said cautious hiring by U.S. firms did not herald another recession in the U.S. economy, the world's largest, stock investors paid no heed. Major U.S. stock indexes fell by up to 3.6 percent on Friday.
Some investors were particularly disappointed by the U.S. jobs data because they had counted on a strong showing to offset bad news around Europe's sovereign debt problems.
World leaders at a G20 meeting over the weekend appeared to acknowledge investor fears about Europe's debt woes by reaching an uneasy compromise on cuts in government budgets. But the outcome had little impact on markets on Monday, however.
The euro's drop on Monday was caused in part by some stop-loss selling around $1.1950. Traders said more aggressive stop-loss selling may be had if the euro falls under $1.1850.
After that, some analysts said the common currency could fall all the way to $1.15.
There might be a bit of support around the $1.18 handle, but we expect it to fall to $1.15 eventually, Jonathan Cavenagh, a currency strategist at Westpac said of the struggling euro.
It's difficult to see a light at the end of tunnel for it just yet.
(Reporting by Koh Gui Qing; Editing by Clarence Fernandez)