New York: Concern that Greece's debt problem might spiral into another global crisis weakened stocks and the euro and fueled buying of low-risk government bonds for a second straight day on Thursday.
A strong early rebound on Wall Street ran out of steam, with uncertainty about Greece sending stocks lower, led by declines in shares of mining, steel and other materials companies.
Escalating jitters over Greece, which could receive 125 billion euros in aid, stoked safe-haven bids for high-rated government debt as shares touched a three-month low. Adding to investor worries was more evidence of a rapid deceleration in US economic activity.
"People are down in the dumps right down. The damage has been done," said Robert Zukowski, senior analyst at 4 Cast Ltd in New York. "The Greek debt situation is not going away."
There is growing concern that a "disorderly" Greek default could roil the worldwide financial system and dry up lending, similar to what happened after the collapse of Lehman Brothers in September 2008.
"That's a disaster scenario," said Guy LeBas, chief fixed in come strategist at Janney Montgomery Scott in Philadelphia, alth ough he added that a disorderly default is remote for now.
The cost of insuring Greek sovereign debt for five years jumped to 1,900 basis points, the highest in the world.
The growing financial stress from Greece's fiscal predicament was reflected in the jump in yields on Spanish government bonds to an 11-year high and rising borrowing costs in the London interbank market.
In US stock trading, the Dow Jones industrial average was up 17.94 points, or 0.15 per cent, at 11,915.21. The Standard & Poor's 500 Index was down 4.14 points, or 0.33 per cent, at 1,261.28. The Nasdaq Composite Index was down 25.23 points, or 0.96 per cent, at 2,606.23.
In Europe the FTS Euro first 300 index closed down 0.42 per cent at 1,084.47, the lowest close since mid-March. The MSCI world equity index was down 0.6 per cent after hitting its lowest level since mid-March earlier, which wiped out all the gains made in 2011.
In Tokyo, the benchmark Nikkei closed down 1.7 per cent following Wednesday's sharp sell-off on Wall Street. In the currency market, the euro last traded at $1.4150 after rising briefly to $1.4201. It touched a three-week low against the dollar earlier.
The euro also declined against the Swiss franc, which strengthens with increased risk aversion. The euro hit a lifetime low of 1.1957 Swiss francs on electronic trading platform EBS in early trading.
Wary investors again piled into high-rated government debt.
US Treasury and German Bund futures rose to contract highs at 124-16/32 and 126.62, respectively. The yield on benchmark 10-year US Treasury notes slipped to six-month lows at 2.91 per cent, down 6 basis points on the day.
US oil futures were up 9 cents at $94.88 a barrel after tumbling 4 per cent on Wednesday. Spot gold prices were last at $1,527.74 an ounce in chopping trading, down from $1,529.85 in late New York trading on Wednesday.
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