Global stocks and the euro fell on Friday as new doubts about Europe's bailout package and worries over the outcome of a key vote in Greece overshadowed signs of improvement in the U.S. labour market.
Greek Prime Minister George Papandreou faces a vote of confidence Friday night, with the fate of the nation's deal on a euro zone debt bailout and the global economy in the balance.
Analysts declared the outcome too tight to forecast, but had a hunch Papandreou might survive the vote, which is expected as late as midnight in Athens (10 p.m. British time).
The bid for safe-haven assets rose, with government debt on both sides of the Atlantic gaining after German Chancellor Angela Merkel said few countries in the Group of 20 leading economies had committed to providing more resources for a euro zone rescue fund.
Merkel's comment eclipsed relief over the decision by Greece on Thursday to ditch controversial plans to hold a referendum on its bailout, a development that initially had calmed fears of an imminent sovereign debt default.
Merkel's comment highlighted the fragility of the deal reached to rescue Greece. At the heart of the deal is a plan to increase the euro zone's rescue fund to give it firepower of 1.0 trillion euros.
Signs of some improvement in the U.S. labour market failed to lift the market. Labour Department data showed U.S. hiring slowed in October, but the unemployment rate hit a six-month low and job gains in the prior two months were stronger than previously thought, pointing to some improvement in the still-weak labour market.
Trading has been volatile on quickly changing news from Europe. The U.S. S&P 500 has registered daily swings of more than 1.5 percent this week. The benchmark index, which posted its best month in 20 years in October, was on track to post its first down week in five.
There's too much uncertainty going on. What Greece has taught us this week is that just when you think things are certain, they're actually not, said Camilla Sutton, chief currency strategist, at Scotia Capital in Toronto.
World stocks measured by the MSCI all-country world index <.MIWD00000PUS> pared losses to trade near break-even on strength in emerging markets. EPFR Global reported $3.5 billion flowed into emerging market equity funds in the week ended Wednesday, the second-largest inflow this year.
In Europe, the FTSEurofirst 300 index <.FTEU3> of top regional shares slid 1.0 percent to 980.01, erasing early gains. The index posted its first weekly loss in six weeks.
Italian banks UniCredit
Italian Prime Minister Silvio Berlusconi, who is facing pressure to step down, turned down an offer of funding from the International Monetary Fund, which has placed the country under supervision as it struggles with its debt mountain.
The Italian bond yield is the only game in town. If this trend continues, we've got serious problems. It's not sustainable. There's no reason to take any more risk at the moment, said David Coombs, fund manager at Rathbone Brothers, which has 15.2 billion pounds ($24.2 billion) under management.
Shortly before the close of trading on Wall Street, the Dow Jones industrial average <.DJI> was down 87.45 points, or 0.73 percent, at 11,957.02. The Standard & Poor's 500 Index <.SPX> was down 9.97 points, or 0.79 percent, at 1,251.18. The Nasdaq Composite Index <.IXIC> was down 14.82 points, or 0.55 percent, at 2,683.15.
Stock sectors most exposed to weakness in European banks and tied to growth, such as industrials, financials, materials and energy were among the weakest.
Shares of daily deals site Groupon Inc
The euro slid against the dollar as uncertainty persisted about the EU's bailout program. The euro fell 0.3 percent to $1.3768.
The December Bund future settled up 73 ticks, while the benchmark 10-year U.S. Treasury note rose 11/32 in price to yield 2.04 percent.
Italian two-year government bond yields jumped and the spread of Italian 10-year yields over Bunds hit a new lifetime high.
Crude oil prices rose in choppy trade.
Brent futures rose $1.14 to settle at $111.97 a barrel. U.S. light crude futures rose 19 cents to settle at $94.26 a barrel.
Spot gold prices fell $8.05 to $1,754.60 an ounce.
(Reporting by Gertrude Chavez-Dreyfuss, Ellen Freilich and Rodrigo Campos in New York; Neal Armstrong, Emelia Sithole-Matarise in London; Blaise Robinson in Paris; Writing by Herbert Lash, Editing by Chizu Nomiyama, Dan Grebler, Leslie Adler)