Global stocks at 2-year low, euro tumbles

Investors dumped euros and shares on Friday as U.S. economic troubles made bets on growth elsewhere look too risky, sending stocks to their lowest in two years while triggering a surge in safe-haven government bonds.
The ratcheting up of fear followed a 3 percent sell-off on Wall Street on Thursday, the steepest decline for more than two months, prompted by an unexpected jump in jobless claims and nervousness ahead of monthly jobs data on Friday.
The renewed worries sent the yen soaring as investors unwound carry trades, ditching bets in which they had borrowed the Japanese currency to buy euros or high-yielding Australian or New Zealand dollars.
"This is not a flight to quality, it is simply a flight," said Alan Ruskin, chief international strategist at RBS Greenwich Capital.
"Gold for example has failed to benefit, cash is king — even the greenback, warts and all, or the yen, zero rates and all."
The euro hit a 13-month low of 150.60 yen before pulling back to 152.30 yen having recorded a 3.6 percent drop on Thursday — its biggest one-day fall since the massive carry-trade unwind in 1998.
"Everyone it seems is closing out positions," said a trader at a Japanese trust bank. "Hedge funds are rapidly unwinding carry trades, and Japanese institutional investors with assets abroad are buying back the yen."
The Australian and New Zealand dollars — long the bellwethers of the carry trade — sank to two-year troughs against the Japanese currency.
SHARES SLIDE
The prospect of less competitive exports to Europe, as well as growing gloom about the global economy, hit Japanese shares such as Mizuho Financial Group and Sony Corp, which fell 6.6 percent and 4.4 percent, respectively.
At 0400 GMT, Japan's Nikkei average was down 2.8 percent, after touching its lowest since March 19, while stocks elsewhere in the Asia-Pacific, gauged by MSCI's index were down 2.4 percent.
The MSCI All-Country World index, down 0.6 percent, plumbed its lowest level since August 2006.
Data during the day showed Japanese companies unexpectedly cut capital spending in the second quarter, likely meaning the economy contracted even more than previously estimated during the April-June period.
A VOLATILE RIDE
As investors dumped stocks, Japanese government bond futures rose, reversing losses made in thin trade on Thursday.
September 10-year futures jumped 1.44 points to 138.94. The benchmark 10-year yield fell 6 basis points to 1.450 percent.
Analysts said 10-year yields would likely have a tough time falling below their four-month low of 1.400 percent.
"Our view is that these are highly volatile markets going nowhere," said John Richards, head of Asia economics and strategy at RBS Securities. "With the central bank on hold and the economy probably in a mild recession, we're stuck in this situation."
The iTRAXX Asia ex-Japan high-yield index a key measure of risk aversion, widened as much as 15 basis points (bps) to 579, its biggest since early July at the height of concerns over U.S. mortgage financing providers Fannie Mae and Freddie Mac
The equivalent investment-grade index widened by as much as 8 bps to 173. However, both indexes tightened by a few basis points each later.
Growth fears rattled commodity markets, with Tokyo platinum — used in vehicle exhausts — plunging by the daily 300 yen limit, or 6.1 percent, because of worries about weak car sales, as well as dollar strength against the euro and weak oil prices.
Gold dipped to $790 an ounce.
In Shanghai, copper fell almost 2 percent to its lowest in three weeks, while the London contract continued Thursday's 1.6 percent slide in electronic trading.
U.S. crude oil held firm in Asian trade, having fallen $1.46 to $107.89 a barrel in New York on Thursday, extending a slide from an all-time peak of more than $147 in mid-July.