Global Shares, Peripheral Bonds Hit By Growth Worry

Global shares fell for a third day on Friday, on course for their longest losing streak in over a month, and yields on lower-rated euro zone bonds rose as a gloomier economic picture in Europe led investors to shed riskier positions.

Weaker-than-forecast GDP figures from euro zone countries such as Italy and France on Thursday challenged market expectations for an economic recovery in the bloc, which have boosted shares and lower-rated bonds in the region since last summer.

Sharp sell-offs in U.S. and Japanese shares and a fall in safe haven Treasury yields strengthened the feeling global investors were starting to question a 20 percent rally in global shares since June 2013, which propelled a key world index to 6-1/2 year highs earlier this week.

'Markets are vulnerable because growth expectations are a little bit too high,' Michael Hewson, chief market analyst at CMC Markets UK. 'It's the usual suspects (that I would buy), so U.S. Treasuries and gold, as well as the Bund.'

The MSCI All-Country World index .MIWD00000PUS was down 0.2 percent, falling for a third day and further retreating from 418.24, a high touched on Thursday and previously not seen since November 2007.

Italian, Portuguese and Irish 10-year bonds were the worst performers, each seeing their yields rise 4 bps, to 2.73 and 3.75 percent and 3.12 percent respectively, while Spain's were 1bp higher at 3.02 percent.

Greek government 10-year bonds rose 4 basis points to hit 6.87 percent, compounding a jump of over half a percentage point on Thursday, which was inspired by nervousness around Greek government stability, a tax on foreign bondholders and a weak growth outlook.

'There will be some investors that are concerned and should take into consideration that is not just a one day movement but something more prolonged,' said Daniel Lenz, strategist at DZ Bank.

Yields on benchmark German bonds, regarded as a safe haven asset due to the country's strong economy, hovered close to a one-year low while the euro consolidated just above a 2-1/2-month trough against the dollar.

In commodities, gold struggled below $1,300 an ounce on Friday as U.S. jobs and factory data indicated brighter prospects for that economy, hurting the metal's appeal as an investment hedge.

Nickel prices climbed after plunging 11 percent in the previous two days to partly erode the metal's stellar rally this year, while copper prices eyed their biggest weekly gain in nearly two months on robust demand.

Brent futures held above $109 a barrel as fresh tensions over Ukraine kept them on course for their biggest weekly rise since mid-April, but returning Libyan supply capped gains.

REUTERS