World stocks, euro at 6-week lows on recession worries

Wed Nov 23, 2011 2:07pm EST
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By Barani Krishnan

NEW YORK (Reuters) - Stock markets across the world slid to six-week lows on Wednesday, with Wall Street on course for a sixth straight day of losses as slowing factory activity in China and Germany increased recession fears.

The euro fell to its weakest since October 6 after Germany suffered one of its least successful debt auctions since the single currency was launched. It was a dangerous signal that the euro zone's prime "safety" play, German Bunds, were starting to lose appeal from investor frustration over the lack of new policy measures to halt the bloc's debt crisis.

Commodity prices also fell. Copper hit one month-lows, oil was headed for its worst week since early October and sugar sunk to 5-1/2 month lows.

Manufacturing in China shrank at the sharpest pace in 32 months in November, reviving fears of an abrupt slowdown for the world's second-largest economy. In Germany, Europe's manufacturing heavyweight, factory activity contracted for a second straight month, and at a faster rate, as export demand slumped.

"Clearly Europe is continuing to drive the bus -- the market is exhausted. It is tired of the lack of leadership on both sides of the pond, tired of the continuing drama that is playing out ... that no one seems to be paying attention to," said Ken Polcari, managing director at ICAP Equities in New York.

"The Chinese economy is slowing and the authorities are waking up to that fact... It's now a question of whether they are prepared to ease monetary conditions as a result," said Nic Brown, an analyst at London's Natixis.

Polcari added: "The path of least resistance is lower because the market is starting to say to you it is getting disgusted with the lack of any concrete plan. Whether it the ECB monetizing the debt, whatever it is, the market is not getting anything -- and so the market is telling you it is disgusted."

The dollar climbed to a six-week peak against the euro and hit session highs against the yen as investors continued to shun risk and seek safety in the currency of the world's largest economy.   Continued...