World shares sank to a three-month low on Monday as concerns about Greece's debts and a reminder of the challenges China faces to curb inflation stung risk demand, helping push the dollar to a six-month high versus a currency basket.
The MSCI world equity index <.MIWD00000PUS> fell to its weakest level since early November, as investors cut exposure to risky trades while Athens scrambles to convince its European colleagues it will do what it takes to repair its finances.
Speculation that China may have to tighten monetary policy picked up after business polls on Monday showed strong growth an higher inflation.
This put selling pressure on high-risk, commodity-linked currencies, which are seen suffering on any tempering in Chinese growth, and helped lift the dollar index <.DXY> as high as 79.534, its highest since late July.
European shares <.FTEU3> took a hit in early trade, sliding 0.5 percent on the day and edging close to a near two-month low hit late last week, while risk aversion also kept oil prices near a 6-week low.
The market is just worried about the things that have been going on over the past few weeks, said Bernard McAlinden, market strategist at NCB Stockbrokers in Dublin.
There is apprehension about the possibility of tightening (in China) and problems of the peripheral economies in the euro zone.
By 0913 GMT (4:13 a.m. EST), the MSCI index was at 285.60, extending losses after it fell roughly 4.5 percent in January, its worst monthly performance since February last year.
Higher risk aversion increased the dollar's safe-haven appeal, lifting the U.S. currency's trade-weighted index and keeping it near a seven-month high against the euro of $1.3852 hit early on Monday.
The high-yielding Australian and New Zealand dollars hit their weakest in more than a month against their U.S. counterpart.
Risk appetite continues to suffer as markets wait to see if Greece will come up with a decisive plan to shore up its finances and cut its debts. The European Union is seen telling Greece to act by mid-May to improve its books.
Concerns about Athens's fiscal situation has triggered heavy selling in Greek bonds, whose yield spreads against German debt blew out to their widest levels on record last week.
The 10-year Greek government bond yielded some 358 basis points more than benchmark German Bunds, compared with around 360 bps late on Friday, and was well off the euro lifetime high of around 405 bps set last week.
Concerns about sovereign debt in Greece and other euro zone nations including Spain and Portugal have triggered selling in their government bonds, which has boosted demand for German bonds, which are considered to be safer.
Ten-year Bund futures edged up 14 ticks to 123.52, staying close to 123.70 hit late last week, its highest since early December.
(Additional reporting by Joanne Frearson in London, editing by Mike Peacock)