Gold at record above $1,600 an ounce as investors seek safety
Worries about Europe's banking woes and debt problems in the U.S. dragged global stock markets lower on Monday.
Crude oil fell below $97 and the dollar strengthened against the euro while falling slightly against the Japanese yen.
The results of stress tests on European banks that were released after the close of trading Friday overshadowed the start of this week's trading.
The results did little to reassure investor confidence in the continent's shaky financial sector, revealing that eight of 90 European banks flunked tests aimed at revealing how they would fare in another recession. Another 16 barely passed.
Ahead of an emergency meeting of EU leaders later this week, investors are growing more worried that Europe's debt crisis will spread to Italy and Spain.
Investors are also unsettled by the inability of U.S. politicians to work out a deal to avoid a debt default before a deadline that is just two weeks away.
"Looking ahead, sovereign debt worries in the U.S. and Europe and a pickup in second-quarter U.S. earnings data are going to compete for traders' attention," said Ben Potter, a research analyst at IG Markets in Melbourne, Australia. "The only real certainty in the coming days is that there is likely to be volatility as the market grapples with these major issues."
Francis Lun, managing director of Lyncean Holdings in Hong Kong, said that market reaction is "quite negative" to the stress test results. "It really shows that it would be a long time before Europe can solve its problem," he said.
In early European trading, the FTSE 100 index fell 0.8 percent to 5,793.73 and France's CAC-40 dropped 1.3 percent to 3,678.26. Germany's DAX slid 1.1 percent to 7,137.13.
U.S. stocks were poised to fall. Dow futures were down 0.6 percent to 12,380.00 while S&P 500 futures were down 0.6 percent to 1,306.30.
In Asia, South Korea's Kospi slipped 0.7 percent to close at 2,130.48 and Australia's S&P/ASX 200 shed less than 0.1 percent to 4,539.90. Hong Kong's Hang Seng fell 0.3 percent to finish at 21,804.75.
Mainland Chinese shares edged lower amid concerns over inflation will remain high in the coming few months, analysts said.
The Shanghai Composite Index lost 0.1 percent to close at 2,816.69 and the Shenzhen Composite Index dropped less than 0.1 percent to end at 1,232.54.
Elsewhere, benchmarks in Taiwan, Singapore and New Zealand also fell. Markets in Japan were closed Monday for a national holiday.
In currencies, the euro fell to $1.4054 from $1.4136 late Friday. The dollar weakened to 79.02 yen from 79.11 yen.
Benchmark oil for August delivery was down 46 cents to $96.78 a barrel in electronic trading on the New York Mercantile Exchange. Crude rose $1.55 to settle at $97.24 on Friday.
Sensex drops 55 points
The Bombay Stock Exchange sensitive index, Sensex, fell by 55 points and closed at 18507.04 on Monday against 18561.92 last Friday as investors sold auto, IT, pharma and refinery stocks on concerns that interest rates might soon go up further in view of high inflation, besides weak cues from global markets on continuing euro-zone and U.S. debt worries. However, overall market breadth was positive on good retail buying in second-line stocks.