World stocks touched a 12-week low on Monday as Chinese data highlighted concerns about weaker global growth, prompting investors to unwind positions in higher-risk assets and buy top-rated government bonds.
The euro hit a record low against the safe-haven Swiss franc while the cost of insuring Greek sovereign debt against default rose to an all-time high. Investors are concerned by signs policymakers are struggling to come to agreement on a second bailout for Athens and that moves to involve private investors will wind up triggering a technical debt default.
Emerging stocks lost a third of a percent but major European shares inched up 0.3 percent and U.S. stock futures pointed to a firmer open on Wall Street later after the Dow and S&P 500 indexes showed a sixth week of losses on Friday. Equities look like a buy at these sorts of levels on a one to two year view, but I would not read too much into it, said David Coombs, fund manager at Rathbone Brothers, which has 15.2 billion pounds under management.
The sovereign debt situation is likely to worsen and it will be very hard to make significant headway for European shares, until we get some clear resolution to Greece.
Chinese stocks ended at a 4-1/2 month low, hit by worries about the impact of monetary policy tightening in an economy which is a key driver of world growth.
China's money growth slowed to a 30-month low in May and banks extended fewer new loans than expected, while exports to the United States and EU hit their weakest since late 2009.
Uncertainty over future U.S. monetary policy after the Federal Reserve's $600-billion bond buying program ends this month also added to investor aversion to taking on more riskier assets, especially going into the thinner summer months.
The MSCI world equity index briefly hit its weakest since mid-March, before stabilizing. The index has lost nearly 8 percent since hitting a three-year peak in late April and is very close to erasing all of its 2011 gains.
Losses in the MSCI benchmark world index are driven by its emerging component, which fell 2.3 percent since January, while developed stocks are still up 0.6 percent year-to-date.
The euro fell as low as 1.20 Swiss francs. Against the dollar it was up around 0.1 percent at $1.4360, finding support on expectations that euro zone interest rates would remain higher than those in the United States.
Five-year credit default swaps on Greek sovereign debt rose 58 basis points on the day to a record high of 1,600 bps, according to data monitor Markit. The bund futures rose 10 ticks.
European leaders are due to finalize a new rescue package for Greece at a Brussels summit on June 23-24, but deep divisions remain about how to get the private sector involved, while the deal would not help reduce Greece's massive 340 billion euro debt load.
What the euro needs is a resolution to the Greek crisis and the politicians and the central bankers do not appear to be close to finding one, said Kit Juckes, currency strategist at Societe Generale.
That uncertainty is weighing on the euro and I expect it to be stuck in a $1.40-$1.47 range.
U.S. crude oil fell 1.3 percent to $97.97 a barrel.
Saudi Arabia will raise output to 10 million barrels per day (bpd) in July, Saudi newspaper al-Hayat reported on Friday, as Riyadh goes it alone in pumping more outside official OPEC policy, aiming to place additional supplies among Asian buyers.
The dollar was steady against a basket of major currencies.
(editing by Patrick Graham)