Growth fears, Greek uncertainty send world shares down

Tue Mar 6, 2012 8:13am EST
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By Richard Hubbard

LONDON (Reuters) - European shares hit a one-week low and the euro fell as riskier assets bore the brunt of fears that the global growth outlook is darkening and that Greece may not be able to complete a major debt restructuring deal.

These concerns look set to spread to U.S. stocks, with major indices poised to open lower despite more positive data on the giant American economy on Monday and hopes that this week's nonfarm payrolls report for February will show a rise in new jobs.

"The market has become sanguine about the U.S. recovery prospects and if the jobs data on Friday is bad then there will be a rush for the door," said Nick Beecroft, senior markets consultant at Saxo Bank.

China's lowering of its economic growth target and data pointing to Europe possibly slipping back into recession have slowly eroded the optimism on global markets generated by the European Central Bank's huge injection of loans to banks since December.

"We've had the ECB bathe us in this warm glow of liquidity but politically there is a lot more to be done, and there is still a risk that tensions could rise again into the spring and summer," said Rabobank's senior currency strategist Jane Foley.

The possibility of Europe falling into recession was highlighted on Tuesday when statistics agency Eurostat said economic euro zone output fell by 0.3 percent in the fourth quarter of 2011, compared to the previous three months.

Leading indicators for the current quarter have signaled further weakness since the start of the year.

There are also signs the growth worries are spreading to the corporate sector, with shares of major car makers dragging the FTSE Eurofirst .FTEU3 index of top European shares down 1.4 percent at 1,065.17 points, its lowest level in over a week.   Continued...

The trading floor is pictured at the Frankfurt stock exchange January 16, 2012. REUTERS/Alex Domanski