World stocks, euro fall on growth, summit worries

World stocks fell and the euro hit a three-week low on Thursday, as divisions among European leaders further diminished hopes of urgent measures to tackle the region's debt crisis when they meet later in Brussels.

Investors turned more cautious after data showed the US economy is losing momentum, posing risk for global growth.

Financial shares took a beating on a report that JPMorgan's losses on recent botched trades could reach USD 9 billion and British bank Barclays plc paid record fines in a probe into the manipulation of interbank loan rates.

Analysts said that with the market so focused on the outcome of the summit trade in the euro would remain choppy and driven by headlines during the summit.

"It's rare that we've seen this amount of discord going into a summit," said Chris Turner, head of foreign exchange strategy at ING. "On the face of it, it looks like it's going to be reasonably negative for the euro."

The European Union leaders meeting on Thursday and Friday is expected to produce a broad roadmap for fiscal, financial and political union across the 17-nation currency bloc and may agree measures to boost growth, but German Chancellor Angela Merkel has brushed aside demands from Italy and Spain for rapid action to lower their soaring borrowing costs.

She also poured cold water on proposals backed by France for euro zone countries to assume joint liability for each other's debts.

Doubts over a significant progress toward a crisis solution at the meeting pushed yields on 10-year Spanish bonds above 7%  and 10-year Italian debt to 6.25%. These are seen as unsustainable borrowing costs for the euro zone's third and fourth biggest economies.

Wall Street stocks opened lower, led by weaker bank shares.

In midmorning trade, the Dow Jones industrial average was down 91.01 points, or 0.72%, at 12,536.00. The Standard & Poor's 500 Index was down 8.14 points, or 0.61%, at 1,323.71. The Nasdaq Composite Index was down 24.52 points, or 0.85%, at 2,850.66.

JPMorgan shares were down USD 1.15 or 3% at USD 35.63 after the New York Times reported, citing people briefed on the situation, losses from a soured credit derivative trade could be as much as USD 9 billion after the US bank said in May it had lost USD 2 billion on the trade.

FTSEurofirst 300 index of top European company shares were down 0.95% to 990.59 points. The STOXX European banking index was down 2.75%.

Barclays stock shed 13.6% at 169.26 pence after agreeing to pay a USD 453 million fine for manipulating interest rates on the London interbank market.

MSCI's world equity index fell 0.48% to 1,195.73, ending two days of gains.

The euro fell 0.25% to USD 1.2438 after touching a three-week low versus the dollar at USD 1.2405.

The dollar index was up 0.11% at 82.711 after touching its highest level in about 1-1/2 weeks.

The move to lower-risk investments fed bids for US Treasuries and German Bunds. Benchmark 10-year Treasury notes were up 12/32 in price to yield 1.58%, down nearly 5 basis points, while Bund futures were up 0.47% at 141.77.

Anxiety about slowing global growth and outcome of the EU summit stoked selling in oil and other commodities. Gold fell more than 1% to its lowest level since June 1 at USD 1,554.49 an ounce. Brent crude futures in London fell 1% at 92.57 a barrel, while US oil futures slipped 61 cents at USD 79.60 a barrel.