World shares fell on Thursday ahead of meetings of the European Central Bank and Bank of England and as worries about Greece's financial stability intensified.
The spread between Greek and German 10-year government bond yields opened out to 416 basis points, the widest in the euro zone's lifetime. Greek bank stocks <.FTABNK> were down 5 percent and the euro fell.
The ECB was expected to try to ease the financial squeeze on Greece later in the day with new details on lending rules. But markets have been hit by renewed jitters after the country's banks asked for billions of euros in support.
Fears about ... a vicious circle developing will likely remain alive, and given that Greek government bonds are probably among the most liquid assets that Greek banks have on the balance sheets, this may continue to weigh on them, Barclays Capital said in a note.
The mood spilled over into world stocks. MSCI's all-country world index <.MIWD00000PUS> was down 0.6 percent. The pan-European FTSEurofirst 300 <.FTEU3> lost more than 1 percent.
Earlier, Japan's Nikkei <.N225> closed down 1.1 percent.
The news in relation to the Greek situation is not helpful, and with the results season kicking off next week, it is encouraging investors to book profits, said Keith Bowman, equity analyst at Hargreaves Lansdown.
Apart from the lending rules, the ECB was expected to keep interest rates at a low of 1.0 percent.
The Bank of England was also seen keeping interest rates at a record low, in its case 0.5 percent, and not adding to the 200 billion pounds of asset purchases made under its quantitative easing programme.
Investors have generally been buoyed by central banks putting back the time when they will start raising interest rates back to more normal levels, but the implication is also that the global economy is not yet properly mended.
The euro fell, grinding closer to this year's low against the dollar.
All the negative issues around Greece are still weighing on the euro, not only against the dollar but against sterling and the yen. Across the board the euro is suffering, said Niels Christensen, currency strategist at Nordea in Copenhagen.
The euro was down 0.3 percent at $1.3296, having hit a two-week low around $1.3293.
On euro zone government bond markets, benchmark yields were down slightly but peripheral economy bonds were suffering along with Greece, albeit to a far lesser extent.
Portuguese/German yield spreads hit 132 basis points, the widest since early March.
(Additional reporting by Simon Falush and Jessica Mortimer, editing by Mike Peacock)