Fresh signs of a deepening global recession knocked world stocks lower for a second straight day on Friday but European bourses managed to find a steadier footing after reversing early losses.
Appetite for riskier assets, however, remained firmly on the back foot, helping to drive the low-yielding yen and dollar broadly higher and giving less risky assets such as U.S. Treasuries a bit of a lift.
Copper, a key barometer of economic activity, extended its fall after Thursday's nearly 3 percent slide. It was down 0.3 percent.
"It seems like everywhere you turn there is a frightful batch of data," said Phyllis Papadavid, currency strategist at SG in London. "I think it's a confirmation of what we've been concerned about in terms of the pace of the downturn in the global economy and clearly the FX market is reacting to it."
World stocks, as measured by MSCI's all-country index fell 0.5 percent, following a 2 percent fall on Thursday.
Wall Street shares dived on Thursday after a report said continuing claims for U.S. unemployment benefit were at a record high, while Japanese stocks fell 3 percent on Friday after the world's second biggest economy posted a record 9.6 percent drop in industrial production for December.
European bourses, which opened lower, reversed direction to be slightly firmer in early trade. The FTSEurofirst 300 index of top European stocks climbed about 0.9 percent.
Delivering a speck of encouraging news late on Thursday, Internet retailer Amazon.com Inc reported a surprisingly strong quarterly profit. See.
YEN, DOLLAR UP AGAIN
In the currency markets, the euro fell 0.6 percent against the dollar to $1.2877 and the common currency was down 1.2 percent versus the Japanese currency at 115.19 yen.
Against a basket of major currencies, the dollar put on 0.2 percent.
"We have fallen back into the well trodden path where weak U.S. data drives the market only in regard to its impact on the rest of the world, rather than what it might say about the state of the U.S. economy," said Stuart Bennett, senior forex strategist at Calyon.
"Hence, whilst the U.S. numbers disappoint, helping to push equity markets lower, the FX market gets rattled and races toward its favoured U.S. dollar and Japanese yen safe havens."
The New Zealand dollar, once favoured by investors because of its high yield, dropped to a six-year low of $0.5077 after the country's central bank governor said interest rates will probably have to be cut further, a day after they were slashed by 150 basis points.
Weakness in global equity markets offered some support to U.S. Treasuries. The yield on the benchmark 10-year note, which moves in the opposite direction of the price, slipped 3.4 basis points on the day to 2.835 percent.
However, the yield was up around 60 basis points in January, the biggest one-month rise since April 2004, with investors concerned about the amount of new borrowing needed to finance the government's rescue plans.
Persistent worries about mounting debt issuance from governments weighed on euro zone government bonds, pushing yields higher. The 10-year yield edged up 4.9 basis points to 3.297 percent.
Optimism earlier this week after the U.S. Congress progressed on a $825 billion stimulus spending package and other efforts to ease the blow of the severe recession seemed to have evaporated as the White House plan is expected to face formidable opposition in the Senate.
