Equity investors had a platter of negative news to pick from as they started the week, ranging from imminent spending cuts in the United States, slowing growth in Asia, a warning about France's credit rating and the prospects of another rift in Europe.
No wonder, then, that Britain's FTSE 100 fell 2.1 per cent, France's CAC 40 lost 2.9 per cent and Germany's DAX lost 2.8 per cent. Japan's Nikkei dipped 0.3 per cent and Hong Kong's Hang Seng fell 1.4 per cent.
Dow stock futures lost 168 points, or 1.4 per cent, trading at 11,599 about two hours before the New York Stock Exchange opened. S&P 500 futures fell 20.20 points, or 1.7 per cent, to 1,193.70.
A special deficit-reduction supercommittee in Washington was expected to admit failure in its quest to agree on how to improve government finances by $1.2-trillion (U.S.) over the coming decade. That would trigger about $1-trillion over nine years in automatic across-the-board spending cuts that some investors fear might not be tuned well enough to sustain growth and create jobs.
In Asia, Singapore and Thailand said their economies would shrink in the fourth quarter, and Japan posted a bigger-than-expected drop in October exports. Chinese Vice-Premier Wang Qishan warned that the global economy is in a grim state.
In Europe, ratings agency Moody's said a recent rise in interest rates on French government debt and weaker economic growth prospects could be negative for France's AAA credit rating.
A resounding election victory by Spain's centre-right People's Party over the weekend failed to calm nervous debt markets. The difference between Spanish and German bond yields rose to 472 basis points in early trade, up by around 28 bps from settlement on Friday.
The European Commission said it believed that the joint issuing of eurobonds by the 17 euro nations would be the most effective way to tackle the financial crisis, according to a draft paper. But that could deepen conflict with Germany, which rejects eurobonds as a viable option because it would expose its taxpayers to weaker countries' bad debt. Germany already funds the bulk of the existing bailouts.
Gold fell by more than 1 per cent to $1,709.10, off an intraday low of $1,701.09. It fell 3.5 per cent last week, its largest one-week decline in a month.
U.S. crude oil fell $1.57 to $96.10 a barrel.
Copper slid 2.8 per cent to $3.31 a pound.
The Canadian dollar lost ground, trading at 96.56 U.S. cents. It was trading at 99 cents just a week ago.