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 Assets which depend on economic growth, such as shares and oil, have
been hit by a raft of weak indicators from Europe at a time when
other big economies, including China, Japan and Brazil face their
own hardships.
Meanwhile, the U.S. Federal Reserve is set to wind down later this
month the asset purchase program which has boosted markets over the
past two years. Many observers doubt the recent stimulus measures
unveiled by the European Central Bank will make up for it.
"There has been a barrage of negative thoughts on growth and growth
assets," said Stewart Richardson, a partner at macro hedge fund RMG
Wealth Management.
"I believe we're entering a bear market. We've been trying to be
short equities and we've been focusing our shorts in Europe and
small caps," he said, referring to bets that shares in those markets
will keep falling.
The MSCI All-Country World index fell 0.8 percent to its lowest
level since April 18 at 403.54 points, taking its loss since the
start of the week to 1.9 percent.
The index, which is eyeing its third consecutive weekly fall, has
retreated by roughly 7 percent since testing an all-time high last
month.
Germany's DAX index sank to a near one-year low while U.S. index
futures suggested shares on Wall Street were set to add to
Thursday's sharp losses.
A string of dismal data from Germany and other large euro zone
economies in recent weeks has fed anxieties about a possible
recession in the region while the jury is still out on the European
Central Bank's proposed policy response.
The ECB's secured debt buying programs, a key part of the bank's
latest package, has yet to kick in and some investors are doubtful
it will be sufficient to shore up growth and inflation in the
currency bloc while the Fed reins in its own stimulus.
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The concerns on global growth hit oil prices hard. European
benchmark Brent crude oil fell 0.6 percent to $89.48, having hit its
lowest level since December 2010 at $88.11.
"It's panic mode. Panic and capitulation," said Carsten Fritsch,
commodities analyst at Commerzbank. "We are now in uncharted
territory, so anything could happen."
Euro zone bond yields bounced off record lows after top Federal
Reserve officials hinted at an interest rate rise in the middle of
next year, reversing some of the bets for a longer period of
near-zero rates.
The dollar also inched higher but was still on course to end a
record-long rally with its first weekly fall in three months.
(Additional reporting by Libby George; Editing by Catherine Evans)
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