Global stocks tumble amid deficit fears

European markets plummeted on Friday amid growing concern over poor US job data and the ballooning deficit of southern eurozone countries. Earlier, Asian stocks fell as investors worried about sovereign debt woes sold risky assets.

By Catherine VIETTE (video)
News Wires (text)

REUTERS - European shares hit 10-week lows on Friday after hefty falls in the previous day, with growing worries about sovereign debt situation in the euro zone and anxiety ahead of a key U.S. jobs data hurting sentiment.

At 0925 GMT, the FTSEurofirst 300 index of top European shares was down 1.3 percent at 980.51 points after touching 977.02 -- the lowest since late November of last year. The index slipped 2.8 percent in the previous session, its biggest one-day percentage fall in 10 weeks.

Investor appetite for risky assets such as equities fell, with the VDAX-NEW volatility index rising 5 percent to a two-month high. The higher the index, which is based on sell and buy options on Frankfurt's top-30 stocks, the lower the market's desire to take risk.

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Banks were among the top losers, with Standard Chartered, Barclays, Lloyds, Royal Bank of Scotland, BNP Paribas, Commerzbank and Societe Generale falling 0.7 to 3.6 percent.

Global stock markets suffered this week on fears that troubles in Greece and other southern members of the euro zone, including Portugal and Spain, could impede or even derail an economic recovery that helped equities surge in 2009.

The Greek prime minister tried to calm investor fears about the creditworthiness of his government after euro zone debt woes provoked a rare direct policy response from the Swiss central bank, which intervened in its own name in Asian foreign exchange trading to weaken its currency against the euro.

The Portuguese government's defeat over a regional finance bill, a climbdown by the Spanish government over pension reform, and protests by Greek tax officials have added to the woes of states struggling to cut budget deficits bloated by recession.

Miners slip, data eyed

Miners also came under pressure as copper prices fell 1.3 percent, aluminium was down 0.8 percent and nickel slipped 2.7 percent.

BHP Billiton, Anglo American, Antofagasta, Rio Tinto, Xstrata and Eurasian Natural Resources fell 1.5 to 3.4 percent.

"It's clear that the (stock) 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.

"We are clearly in a correction mode. If U.S. job figures are good, the market could see some bounce from oversold levels."

An unexpected increase in U.S. unemployment claims data on Thursday made investors nervous ahead of the non-farm payroll numbers, due at 1330 GMT. The jobs numbers will be closely watched by markets given its implications for consumer demand in the world's biggest economy.

Asian stocks at five-month low

Asian stocks fell to near five-month lows on Friday as investors dumped riskier assets after rising sovereign debt problems in the euro zone and poor jobs data sent U.S. and European stocks tumbling.

Asian stock markets and commodity prices recoiled on fears that growing euro zone troubles could impede or even derail the global economic recovery.

Japan's Nikkei average dropped more than 3 percent to its lowest in seven weeks, with exporters hurt by a stronger yen as well as the escalating problems in Europe. The yen, like the dollar, has firmed as investors move into assets traditionally seen as safe havens in times of market turmoil.

Asian stocks outside Japan have fallen close to 9 percent this year after rising 68 percent in 2009 on the back of government measures worldwide that stimulated spending and dragged the global economy back from the abyss.