World stock prices fell for the fourth day running on Monday and the dollar traded close to two-month lows on growing concerns of slowdowns in the United States and China -- the two main pillars of global growth.
Trading was expected to be light on Monday because of the U.S. Independence Day holiday.
Data showing the U.S. labor market shrank for the first time this year in June, slower Chinese manufacturing activity and euro zone austerity measures fueled concerns over prospects for the global economy.
Double-dip (recession) fears are the pervading influence on market psychology at present even as European sovereign (debt) concerns appear to be easing, said Mitul Kotecha, global head of foreign exchange strategy at Credit Agricole CIB in Hong Kong.
World stocks measured by MSCI All-Country World Index <.MIWD00000PUS> drifted 0.1 percent lower after three consecutive sessions of declines. The index has lost 16 percent since mid-April, and is down 11 percent for the year.
The index carried a one-year forward price-to-earnings ratio of 11.9, a level last seen in April 2009 and well below its 10-year average of 15.42, according to Thomson Reuters DataStream.
By comparison, MSCI emerging equities index <.MSCIEF> had a one-year forward P/E of 10.76, in line with its 10-year average of 10.8, DataStream showed.
Europe's FTSEurofirst 300 <.FTEU3> was flat, with the continent's banks <.SX7P> dipping 0.1 percent.
French Economy Minister Christine Lagarde said on Saturday that stress test results to be published on July 23 will show that banks in Europe are solid and healthy.
However, there is a certain amount of skepticism that the stress tests (on banks) ... will either be fudged or the complete results won't be published. What we need is clarity, said Felicity Smith, fund manager at Bedlam Asset Management.
In Asia, Tokyo's Nikkei average <.N225> put on 0.7 percent, while the Shanghai Composite Index <.SSEC> dropped 0.8 percent.
DOLLAR NEAR 2-MONTH LOW
The dollar <.DXY> added 0.2 percent against a basket of major currencies, recovering slightly from a near two-month low as traders held back given the U.S. market holiday. The dollar index lost 1.9 percent in the previous two sessions.
The euro paused after last week's boost from unwinding of short and leveraged positions. It slipped 0.3 percent to $1.2529 and dipped 0.3 percent to 109.98 yen.
The shared European currency has lost 12.5 percent against the dollar so far this year, though attention now appears to have turned to concerns of a slowdown in the United States and away from the euro zone's banking and government debt woes.
The dollar is responding to weak signs in the U.S. economy, said Lee Hardman, currency economist at Bank of Tokyo-Mitsubishi UFJ.
BNP Paribas said investors can cheaply hedge a cross-asset portfolio against the risk of a double dip in global growth with currencies. In a note, it recommended investors short a basket of 2/3 Australian dollar and 1/3 New Zealand dollar and long a mix of Swiss franc and yen.
Global growth worries also sent German government bond futures 25 ticks higher to 129.56 from Friday's settlement close, and yields on benchmark 10-year Bunds fell 2 basis points to 2.564 percent.
(Additional reporting by Kevin Plumberg in Hong Kong, Charlotte Cooper in Tokyo, and Atul Prakash, Tamawa Desai and George Matlock in London; Graphics by Scott Barber; Editing by Ruth Pitchford)