Stocks fell and the euro slumped to a four-year low on Monday as Asian markets caught up with Friday's sell-off in the West, shrugging off encouraging data and remaining fixated on troubles in the euro zone.
Shanghai stocks <.SSEC> were down 5.07 percent, reflecting the negative mood across Asia, as investors worried that European austerity measures would stifle a recovery, affecting Asian exports to the West.
It is probably a good excuse for a sell off, said Mike Lenhoff, chief strategist at wealth manager Brewin Dolphin. We have a recovery but it is a feeble one. If you load on to that recovery a severe dose of fiscal austerity, the prospects then for a sustainable recovery (are strained).
The FTSEurofirst 300 <.FTEU3> index of top European shares opened down 0.43 percent, while core euro zone government bond futures opened nearly half a point higher as investors sought the safety of German paper.
On Sunday, German Chancellor Angela Merkel said that a $1 trillion EU/IMF bailout plan had only bought the euro zone time to tackle its fundamental problem -- a yawning gap between its strongest and weakest economies.
World stocks as measured by the MSCI All-Country index <.MIWD00000PUS> were down 1.07 percent whilst the more volatile emerging markets index <.MSCIEF> was down 2.46 percent.
Earlier in Japan, the Nikkei fell 2.17 percent to a 10-week closing low, mirroring falls in the rest of the region as investors ignored encouraging economic data from the United States, Japan and Singapore.
Exporters such as Canon Inc <7751.T> were hit as the low-yielding yen rose broadly, boosted by the rise in risk aversion, whilst China-linked shares such as Komatsu <6301.T> were clobbered by the fall in the Shanghai index.
EURO EXTENDS LOSSES
The euro extended its losses to $1.228, down about 0.6 percent on the day, and over 14 percent lower year to date, making it the worst performing major currency.
The euro is a one-way trade right now and capitulation is on my mind. I can see a move toward $1.2000 at least, said Kenneth Broux, market economist at Lloyds Banking Group.
Sterling slid to its lowest level since March 2009 at $1.4249 before rising back to $1.438, still down 1.01 percent on the day.
Weakness in the euro and the pound helped the dollar index <.DXY>, which rose above 87.00, the highest since March 2009.
Bund futures opened 42 ticks higher at 123.95, while 10-year euro zone bond yields were flat.
(Additional reporting by Blaise Robinson, Jeremy Gaunt and Neal Armstrong; editing by Jason Webb)