Global shares hit three-month lows and the euro fell to an eight-month low against the dollar on Friday as euro zone sovereign debt problems and nerves ahead of U.S. jobs data led investors to dump riskier assets.
The dollar hit an eight-month high as investors sought safety in the greenback. Commodities and oil, which fell sharply on Thursday, stayed under pressure ahead of the key U.S. non-farm payrolls report seen as an indicator of the strength of U.S. economic recovery.
European shares <.FTEU3> fell to two-month lows, following sharp falls in New York and Tokyo markets. The MSCI global index <.MIWDOOOOOPUS> hit its lowest since early November.
A Reuters survey predicted U.S. employers added 5,000 jobs in January but an unexpected rise in U.S. weekly job claims on Thursday added to investor nervousness.
It's clear that the market is shifting from extremely risk-loving to once again becoming risk-averse and this is an environment to be extremely cautious, said Philippe Gijsels, senior equity strategist at BNP Paribas Fortis in Brussels.
The euro hit its weakest level against the dollar in more than eight months as widening government bond spreads highlighted concerns over the ability of some euro zone governments to pay their debts.
Widening euro zone CDS and bond spreads over German Bunds are making investors less confident, which is weighing on the euro and putting pressure on equity markets, said Jeremy Stretch, strategist at Rabobank.
The euro, which fell as low as $1.3649, has been under pressure all week as investors handed out a hammering to bonds of heavily-indebted euro zone countries, including Greece, Portugal and Spain.
The concern over sovereign credit has also begun to knock confidence in markets beyond the euro zone.
Emerging markets equities have fallen sharply in the past two weeks, with a key index <.MSCIEF> at a three-month low.
The cost of insuring Greek, Portuguese and Spanish debt against default both hit record highs on Friday.
Portugal's parliament will on Friday vote on an opposition bill that the government wants to block to avoid increasing the budget deficit, as it fights growing fiscal woes.
The euro remains on a downward trend for the longer term unless there is a convincing prospect of an improvement in the euro zone fiscal troubles, said Minoru Shioiri, chief manager for FX trading at Mitsubishi UFJ Securities.
The dollar rose, hitting an eight-month high against a currency basket <.DXY> as investors sought a safe haven and the Japanese yen also benefited.
The euro's sharp fall in Asian trade saw the Swiss franc hit a 15-month high against the single European currency and traders said the Swiss central bank stepped in to buy euros and push the franc lower.
Benchmark German government debt rose in price as bond investors fled the lower-rated, so-called peripheral issuers. The Bund future hit its highest since April and the yield on the two-year note hit its lowest since the euro was launched in 1999.
U.S. stock futures pointed to a lower open in New York. The Dow Jone Industrial average <.DJI> fell 2.6 percent, dipping below the 10,000 mark, on Thursday on anxiety over the euro zone debt problems and after the U.S. weekly jobs data.
Tokyo shares <.N225> fell almost 3 percent, although shares in Toyota <7203.I> rose despite the carmaker's troubles over recalls.
Spot gold, extended Thursday's falls, touching a three-month low of $1,049.50 an ounce, compared with $1,062 in New York.
Crude oil stood at $73 a barrel, having hit an intraday low of $72.42 on Thursday.
(Additional reporting by Dean Yates, Emelia Sithole, Atul Prakash and Naomi Tajitsu; editing by Patrick Graham)