LONDON — Global growth concerns hit stocks hard Friday, while the euro was hurt by a sharp disagreement in Europe over how to deal with Greece's debt crisis.
A smaller than anticipated Chinese trade surplus in May and a slump in British industrial production in April added to the view that global growth is slowing — and not just in the U.S.
Stocks around the world, but particularly in the U.S., have been under pressure over the past few weeks as a run of weak economic data stoked fears that the global recovery is running out of steam despite historically low interest rates and money injections.
"The global economy is embarking on a 'soft patch' and this is especially the case for advanced countries, but nobody knows what the magnitude and duration will be," said Herve Goulletquer, an analyst at Credit Agricole.
"From a market stand-point three main issues must be addressed: the reason for the soft patch, its main characteristics and the policy response," Goulletquer added.
The uncertainty caused stock market sentiment to turn sour following a bright start to the year.
In Europe, the FTSE 100 index of leading British shares was down 1.3 percent at 5,782 while Germany's DAX fell 1.2 percent to 7,076. The CAC-40 in France was 1.6 percent lower at 3,815.
In the U.S., the Dow Jones industrial average was down 1 percent at 11,998 while the broader Standard & Poor's 500 index fell a similar rate to 1,276.
In the currency markets, the euro continued its descent from recent one-month highs amid signs that policymakers in Europe have divergent views on how to deal with the Greek debt crisis.
Signs of discord were evident Thursday, when the European Central Bank's president Jean-Claude Trichet issued a thinly veiled riposte to Germany about forcing Greece's bondholders to share some of the pain in helping the country.
Germany's finance minister Wolfgang Schaeuble has proposed that bondholders contribute a "substantial" portion of a fresh bailout package for Greece by giving the country an extra seven years to repay the bonds. But Trichet said nothing should be done that would be deemed "a credit event" by the ratings agencies and that any private sector involvement has to be done on a voluntary basis.
"The escalation of tensions between Germany and the ECB — tensions that markets believed had been resolved — was a key factor undermining confidence," said Derek Halpenny, European head of global currency research at The Bank of Tokyo-Mitsubishi UFJ.
"For the financial markets to remain stable and the euro supported there will need to be a resolution to the German-ECB conflict," he added.
By mid afternoon London time, the euro was 1 percent lower at $1.4370. Just a day ago and before Trichet's comments, it was trading over $1.46.
Earlier in Asia, Japan's Nikkei 224 index rose 0.5 percent to close at 9,514.44, while South Korea's Kospi index slid 1.2 percent to 2,046.67 after the Bank of Korea raised its key interest rate for the fifth time in less than a year as it fights inflation.
Hong Kong's Hang Seng ended 1.3 percent lower at 22,315.47 while the Shanghai Composite Index edged up less than 0.1 percent to 2,705.14.
Worries over the pace of the global economic recovery have weighed on oil prices too. Benchmark crude for July delivery was down $2.65 at $99.28 per barrel in electronic trading on the New York Mercantile Exchange.
Friday's decline means oil prices have given up all the gains accumulated in the aftermath of Wednesday's surprise decision by the OPEC oil cartel not to raise production levels.
Pamela Sampson in Bangkok contributed to this report.