World stocks post worst quarter in 3 years

Fri Sep 30, 2011 5:07pm EDT
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By Rodrigo Campos

NEW YORK (Reuters) - Global stocks closed their worst quarter in nearly three years on Friday on nagging concerns about the world economy and the lack of a credible solution to Europe's debt crisis.

The euro and most commodity prices also fell as investors' search for safety drove up U.S. government bonds and the dollar.

Adding to a string of global data that has crushed growth-related assets in the past three months, China's manufacturing sector contracted for a third straight month in September while German retail sales slid at their sharpest pace in more than four years.

An unexpected rise in euro-zone inflation for September also moderated talk that the European Central Bank would cut interest rates. Still, the euro fell sharply to close its worst quarter against the U.S. dollar since mid 2010.

"The combination of sovereign debt crisis, a slowing economy and really what appears to be ineffective leadership in Europe has led to this decline, and we expect that to continue to play out in the fourth quarter," said Omer Esiner, chief market analyst at Commonwealth Foreign Exchange in Washington.

U.S. stocks fell, closing their worst quarter since the collapse of Lehman Brothers in late 2008 with sharp declines.

The MSCI All Country World Index slumped 18 percent for the quarter, with a drop of 2.3 percent on Friday. It lost roughly $5.29 trillion in market capitalization in the quarter, according to Thomson Reuters Datastream.

On Friday, the Dow Jones industrial average dropped 240.60 points, or 2.16 percent, to 10,913.38. The S&P 500 fell 28.98 points, or 2.50 percent, to 1,131.42. The Nasdaq Composite slid 65.36 points, or 2.63 percent, to 2,415.40.   Continued...

<p>A man looks at the WIG20 index on a screen at the Warsaw Stock Exchange September 26, 2011. Central European stocks rebounded with other European bourses on Monday but the Polish zloty fell as unease over the euro zone debt crisis overshadowed last week's central bank intervention. REUTERS/Kacper Pempel</p>