Stocks fell in Europe and Asia today while safe-haven bonds firmed as a tape of al Qaeda leader Osama bin Laden unnerved investors on the second anniversary of the September 11th attacks. The death of Sweden's foreign minister, after a knife attack yesterday, added to the gloom.
Tumbling stocks hit the dollar, which hit a three-week low against the euro, and gold rose as the security concerns exacerbated investor caution about the strength of the nascent global economic recovery.
European shares opened weaker, following falls in Japan and on Wall Street. The FTSE Eurotop 300 index of pan-European blue chips was down 0.68 per cent while the narrower DJ Euro STOXX 50 index was off 0.62 per cent.
European stocks have fallen for two consecutive days as investors have taken profits from a month of gains. Japanese shares were the biggest losers in Asia, nursing their heaviest falls in two months as semiconductor stocks mirrored a tumble in their US peers.
The Nikkei average closed down 2.9 per cent at 10,546.33, with chip equipment makers Tokyo Electron and Advantest falling around six per cent. US stocks closed lower last night as the bin Laden tape also unnerved Wall Street investors.
Shares had been down earlier after a forecast from chip maker Texas Instruments failed to impress investors anticipating a rebound in the sector. The tech-dominated Nasdaq index fell 2.65 per cent for its biggest percentage drop in nearly two months. The blue chip Dow Jones Industrial Average fell 0.91 per cent. Shares have made big gains as evidence has mounted of economic recovery. But a surprise fall in US payrolls last Friday turned many investors cautious on growth bets.
Euro zone and Japanese government bond yields, which move inversely to prices, fell. Traders said bonds were benefiting from both weakness on equity markets and safe haven flows. Bond yields have been rising as economic data has improved and investors have shifted into stocks. However, an auction on Wednesday of $16 billion of US debt met strong demand and drove Treasuries yields lower.
In the currency markets, the dollar was down at $1.1250 per euro, its weakest since August 15th. It was steady on the day versus the yen at 117.15, helped by wariness over Japanese intervention and the fall in Tokyo stocks.
Gold edged higher in early European trade. Spot gold was at $380.25/381 an ounce, compared with $379.60/370.30 at New York's close.