LONDON/NEW YORK - World shares fell on Monday as investors shied away from riskier assets, unnerved by a darkening global growth outlook and mounting doubts of speedy progress to resolve Europe's debt crisis.
The euro recovered from a two-year low against the dollar, but remained fragile as the optimism raised by last month's European Union deal to help indebted states and banks faded. Yields on benchmark Spanish and Italian bonds were also moving up to levels considered unsustainable.
Wall Street opened modestly lower after data in Asia raised concerns about slower economic growth there. Investors were also looking ahead to earnings season, with Alcoa, the US aluminium producer, reporting results at the end of the day.
But it was a meeting of eurozone finance chiefs later on Monday that held centre stage, with doubts growing over whether they will make much progress on plans for a single eurozone bank regulator, or on how the region's new bail-out fund can be used to reduce a country's borrowing costs.
"In terms of progress, we might actually see a bit more clarification on where we are, but I don't think progress is necessarily the word you use here," said Rob Carnell, international economist at ING.
The euro was last up 0,1% against the dollar at $1,2294, off a low of $1,2255 hit in thin early trade as traders reported demand to sell the currency above $1,23.
But time was looking to be running out for Spain, where 10-year government bond yields were 10 basis points higher at 7,08%, a borrowing cost widely regarded as unsustainable for any eurozone government.
Equivalent Italian debt followed the Spanish debt higher, rising a similar amount to 6,13%.
At the weekend, Spanish Prime Minister Mariano Rajoy promised to announce more austerity measures in the coming days but also called on his eurozone partners for greater urgency to tackle the funding crisis.
Diplomats said on Monday that Europe would grant Spain an extra year to reach its deficit targets after it outlined further budget savings to finance ministers meeting in Brussels.
Weaker-than-expected Chinese inflation data, a record fall in Japan's machinery goods orders and Friday's disappointingly weak US jobs report undermined sentiment in equity markets.
However, the losses were limited as the data were also seen boosting the prospects for stimulus from the world's major central banks.
Chinese Premier Wen Jiabao said on Sunday that more aggressive efforts to fine-tune economic policies were needed to support an economy still under downward pressure.
The FTSEurofirst 300 index was down 0,4% at 1029,82 points, while the S&P 500 was down 0,5% at 1348,22 in early-morning trading.
The MSCI world index, hit by a weaker session in Asia, was down 0,8%, a fourth straight day of declines.
In the US, investors were braced for the release of Alcoa's quarterly results after the Wall Street close. This will mark the official start of the next reporting season.
Corporate outlooks are at their most negative in nearly four years and companies that have already reported have shown lacklustre growth. Nearly two dozen S&P companies have already cited Europe's woes as a concern.
Oil rose as talks to resolve a strike in Norway failed over the weekend, causing supply worries to offset concerns about weaker demand from slowing growth.
Brent rose 48 cents to a high of $98,66 a barrel and US crude was up 21 cents at $84,66.