Growth worries hobble stocks, Swiss franc falls

European shares follow the Asian markets down as worries over the US economy and eurozone debt lead investors to lock in profits after earlier rallies

Worldstocksfell on Thursday as heightened worries about sluggish economic recovery prompted investors to cut exposure to riskier assets, while the Swiss franc fell as the central bank took further steps to halt its steady rise.
European shares followed Asian markets down as worries about the U.S. economyand dim prospects of a quick fix for the euro zone's debt crisis led investors to lock in profits following this week's rally.
The retreat in riskier assets buoyed gold and safe-haven government bonds, with German Bund futures FGBLc1 hitting record peaks and benchmark U.S. Treasury yields falling to their lowest level in a week.
Adding to the glum economic picture, UK. retail sales grew at an unexpectedly slow pace in July.
Earlier, Morgan Stanley analysts became the latest to cut forecasts for global growth, citing "recent policy errors" in the United States and Europe, plus prospects of further fiscal tightening in 2012.
Deutsche Bank cut its projection for Chinese GDP growth to 8.9 per cent for 2011 from 9.1 per cent and to 8.3 per cent for 2012 from 8.6 per cent, largely reflecting a downgrade in export outlook due to slower growth in the United States and Europe.
European stocks fell 2 per cent, wiping out the previous session's gains.
"At the start of the week, we were expecting a sell-off and it hadn't materialised, with people selectively putting money into a few stocks keeping the froth alive, and so I think it is overdue," the head of institutional trading at a UK-based investment bank, said.
MSCI's world equity index fell 1 per cent while emerging stocks lost 1.5 per cent.
U.S. equityfuturespointed to a lower open on Wall Street after closing flat the pervious day following a gloomy sales outlook from tech bellwether Dell which fanned fears slow economic growth would crimp earnings in the third quarter.
SWISS TUG-OF-WAR
The Swiss franc fell against the euro and the dollar with traders saying the central bank was intervening in the forwards market in its bid to curb the currency's strength.
The plight of the Swiss franc is part of a larger battle over Europe's fiscal crisis, with the Swiss currency favoured by investors seeking safety in a currency other than the euro.
"They (the SNB) have been in the fx swap market," said Chris Walker, currency strategist at UBS. "But we think the euro/Swiss franc will still fall back towards parity."
"The dollar is also being preferred as there are reports of funding stress and as a loss of risk appetite sees investors make a scramble for the dollar."
The euro last traded 0.2 per cent up at 1.1422 francs while the dollar stood 0.5 per cent firmer at 0.7941 francsf.
The greenback also rose against commodity-linkedcurrencieslike the Australian dollar.
Defying the stronger U.S. dollar, spot gold gained 0.3 per cent to $1,793.89 an ounce, just 1.1 per cent shy of its all-time high of $1,813.79 struck last week.
In bond markets, German Bund futures FGBLc1 rose as much as 87 ticks to a fresh year-high of 134.79 as the weak economic outlook and concerns EU policymakers were not doing enough to tackle the region's debt crisis spurred the flight to quality.
U.S. Treasuries advanced, pushing the 10-year T-note yield about five basis points lower to a one-week low of 2.118 per cent.
Brent crude futures LCOc1 fell 1.2 per cent to $109.20 a barrel, as investors fretting over the euro zone's debt woes and slower global growth tried to lock in profits from a rally in oil prices to their highest levels in nearly two weeks.