World stocks fell to a one-week low on Monday and the euro hit a three-week trough against the dollar as investors worried the U.S. jobs market may be beyond easy repair and Europe faced a series of risks that would reignite its debt crisis.
A week packed with political and legal challenges begins with the German Federal Constitutional court ruling on Wednesday on suits claiming Berlin is breaking German law and European treaties by contributing to multi-billion euro bailouts of Greece, Ireland and Portugal.
Data on Friday showed U.S. employment growth ground to a halt in August, sending Wall Street sharply lower. With the jobless rate stuck at 9 percent, President Barack Obama and the Federal Reserve are under pressure to provide more stimulus to aid the frail recovery.
Jobs have been front and center of this whole recovery debate. The problem is that there simply hasn't been any meaningful jobs growth, which is precisely why markets are so worried about slipping back into recession. The authorities have thrown a lot of stimulus at the problem and to date, it's basically done nothing, said Ben Potter, strategist at IG Markets.
One of the major reasons why markets are going to struggle to move higher any time soon is the fact that there simply isn't any clarity as to how and where these jobs may come from. Markets are realizing that there probably isn't a lot more authorities can do.
MSCI world equity index fell 1.4 percent on the day. It is just over 4 percent above an 11-month low hit during market turmoil in early August and has lost nearly 10 percent since January.
European stocks fell 2.2 percent while emerging stocks lost 2.3 percent.
U.S. crude oil fell 1.8 percent to $84.92 a barrel.
Bund futures rose 82 ticks to a record high.
The dollar rose 0.4 percent to set a one-month high against a basket of major currencies.
The euro fell 0.3 percent on the day to $1.4124.
As many European financial institutions are saddled with losses on bond holdings, traders are also worried that their funding could face more strains, putting pressure on the euro.
Countries that need help are getting tired of reforms. Countries that are paying money are getting tired of helping, said Kimihiko Tomita, manager of forex at State Street. The outlook of the euro zone bailout scheme is becoming a bit shaky.
(Editing by Patrick Graham)